A couple of days ago I wanted to show you how you can earn a lot of money by trading CFDs (Contracts for Difference). I made a pledge to myself, and to you, that I only was going to use 10 000 NOK (approx. 1200 USD) as my initial bankroll. The goal was to make as much money as possible in the coming weeks (and months). However, as I also wrote: This is margin trading and highly risky. You can earn a lot of money with the correct trades, but you can also lose an equivalent amount of money. You can even lose more money than you have on your account – if you are really unlucky.
I knew that I most likely was going to go bankrupt (lose my entire bankroll) in the near future. But that it would only take two days to lose it all, well that even surprised me.
Read the first post here: (Video) How I Earned $400 + in less than 5 minutes Today
Second Day Trading, What went wrong
Well, as you might have guessed, I lost both my initial bankroll of $1200 and the $400 I earned the previous day. So what happened?
I thought I read the current market correct and added a “buy” order at 7 points. I was up more than $200 (with $1800 on the account) within 10 minutes, but then the market shifted and a downtrend started to appear. The Dow Jones index fell sharp for a few minutes and I got nervous. Suddenly I was down with more than $600. You might ask yourself why I would trade with such a high margin and not put a stop-loss order sooner. Of course, I could have traded safer, but that was not the point with my experiment.
After I saw that the market had shifted and that it wasn’t likely to change, I closed the position at -$800. My bankroll was now $800. Then the “human psychology” enters the scene. When most humans lose money on a trade, they tend to get obsessed with the fact that they should try to recover what was lost – and then some more. That’s exactly what happened in my case as well (even though I am very familiar with the phenomena). So, I entered a second trade with what was left in my bankroll. And yes, that trade was a losing trade as well. When I thought I saw a downtrend in the market, it suddenly changed and went beyond my first buy position. So, if I just had waited and held on the first trade, I would have had more than $2000 on my account. Instead, I got anxious and traded a second time ending up in a losing streak.
When that is said, I could have been a lot more careful. I could have traded for far less than I did to ensure that I didn’t lose my entire bankroll (the golden rule is to have 50x what you are currently trading for as your bankroll). But, I’ve done this for more than 3 years, and it always comes back with the same result:
Unless you know something that the market doesn’t, you will end up losing money or earn less than by putting your money into an index fund.
I’ve tried multiple strategies, and the problem with CFD trading is the fee you pay every time you enter a new trade. And when you leave a trade over a longer period of time, you can end up paying even more due to the difference between the CFD market and the assets you trade during opening and closing hours + an interest fee that the CFD-platform charges (when leaving a position overnight).
I hoped that I could have traded over a longer period with my 10 000 NOK, but the result would have been the same and that was my initial goal with the experiment. To warn you about trading with CFDs and to make you understand that you should never, ever, start trading CFDs. Unless you are a wonder child or have a robust system that works more than 75% of the time (which no one has), do not bother to start with CFD trading.
I know it looks like “easy money”. But please read our 2. lesson: Never lose money. I’m 99% certain that if you start with trading CFDs, you will end up losing money eventually.
All in all, I’ve lost more money on CFD than I’ve earned. And yes, some days I earned more than $60 000.
Please make a comment below if you wish to correct my findings or if you got any questions.