Money management or risk control is as important in CFD trading as it is in any other form of trading or investment. It tends to be one of the most overlooked aspects of trading and yet arguably is the most important in generating long term trading success. There are several pitfalls. A common mistake that many traders make is to stake too high a percentage of their bank or 'pot' on a single trade.
This can be for any number of reasons; inexperience, a desire to accelerate gains quickly, or overconfidence from a run of winning trades. Psychologically the CFD trader can feel over exuberance with the high of success and the desire simply to 'get rich quick.' But losses to can also lead to money mismanagement. In this case the CFD trader, sitting on a loss and with a dent to both his bank and his pride, will attempt to win back his loss quickly so he can then resume the upward trend.
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