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7 Ways to prevent overtrading in the CFD market

4 min read

Trading in the CFD market can be thrilling and exciting, but it is a risky endeavour that requires caution. The challenge of trading in this volatile market is to refrain from overtrading – committing more capital than you can comfortably afford to risk or trading too frequently with excessive leverage. Fortunately, there are several ways you can prevent overtrading and mitigate your losses. 

In this article, we’ll explore seven strategies for avoiding overtrading in the CFD market so that you can maximise your chances of doing wellwhile mitigating your risks. Read on for some valuable insight into smart traders’ habits.

Set realistic goals

To successfully trade CFDs in Australia, one must prevent overtrading. One of the essential steps in achieving this is to set realistic goals for yourself. It is important to trade only within the limits of what you can afford and occasionally take time off from trading.

It will give you time to step away from your trades, analyse them objectively and gain perspective on your performance. Setting realistic goals based on your knowledge and experience and following money management principles are crucial to trading success in the CFD market.

Fix your losses

In the CFD market, it’s crucial to accept losses and move on. When you fix your losses, you will be able to recognise when a trade is going in the wrong direction and measure how much money you are willing to lose before cutting your loss early. It is an essential strategy for limiting financial losses and managing the psychological stress associated with trading.

When setting limit orders for fixing your losses, make sure they are realistic, given the current market conditions. For example, if markets are highly volatile and prices are swinging rapidly, a small stop-loss order may not cut it as there could be significant slippage between when you placed the order and when it triggers.

Do not overleverage

One of the most common mistakes traders makes to leverage their trades. Leverage allows you to open more significant positions with less capital, but it also increases your exposure and risk, so it’s essential to use it wisely. Ensure you understand how much leverage you’re comfortable using and do not exceed those limits.

Another important rule is to use at most ten times your available capital in any single trade. It will ensure that you can survive many losing trades without being completely wiped out and continue trading for extended periods.

Don’t be afraid to say ‘no’

Successful traders have the discipline to stick to their trading plan and stay focused on opportunities that seem too good to be true. If a trade looks risky or you feel uncomfortable, don’t hesitate to say ‘no’ and move on to another setup.

It is also vital to remain emotionally detached from trading decisions so that you can trust your instincts and stay focused on your long-term goals. Don’t let fear, greed or any other emotion cloud your judgement.

Monitor your emotions

Trading is a psychological game as much as it is a financial one. It’s essential to keep track of your emotions while trading and take regular breaks if you need more support.

One way to do this is by keeping a journal where you can write down your thoughts, feelings, and observations concerning each trade you make. It will help to keep you grounded and focused on the bigger picture rather than getting caught up in short-term gains or losses.

Do not trade the news

It is important to remember that the CFD market reacts to news events, so be aware of any news releases or economic reports that could impact your trades. Trading the news can be tempting, but it comes with many risks and should be avoided unless you are an experienced trader who understands how to manage these risks effectively.

If you decide to trade the news, calculate your risk exposure beforehand and limit your positions accordingly.

Practice risk management

Risk management is essential in trading, and it’s important to be aware of the potential risks in any trade you enter. Risk management practices include setting stop-loss orders, limiting position sizes, diversifying your portfolio, and using a risk/reward ratio when determining entry and exit points.

It is also essential to always have an emergency fund on hand for unexpected losses or unforeseen events that could impact your trades. It will help weather any storm without depleting your trading account.


Following these tips can reduce the chances of overtrading in the CFD market and help you become a more successful trader in the long run. Remember that trading is a marathon, not a sprint; the key is to focus on building up your skillset over time and managing risk effectively.

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