A day in the life of a CFD trader

Explore the ins and outs of a real life CFD trader.  The excerpt below is a day in Catherine Davey’s trading diary from her book, Making Money from CFD Trading.

These entries not only describe the reasoning behind and execution of her trading strategies, but also present an honest, inspiring and often humourous discussion of her emotional journey as a trader.

Making Money from CFD Trading
How I turned $13,000 into $30,000 in three months
By Catherine Davey

Day 19
Friday, 22 July
Total: $13794

Excel Coal (EXL) gaps on the open and races higher again. My position of 4500 looks too good to be true, which is usually a sure sign I should be taking a profit. I see it trade above $8.40 very quickly, a move of over 200 above yesterday’s close, and I immediately move my stops in tight. I place a stop-loss order for 3000 at $8.29, because the only place the price paused on a swift move to $8.48 was at $8.30. I watch it as it pulls back and hovers around $8.40. I contemplate exiting, but soon enough it’s down again, gapping from $8.40 to $8.35, then a few ticks to $8.30. Once the 3000 are out at my $8.29 stop-loss, I walk away to get a drink. I come back and the stock is trading in the $7.80 range. Luckily I had a stop for the remaining 1500 at $7.97. I’d forgotten about it, because I hadn’t expected the price to fall to that level. This good fortune—a positive mistake on my account—is perhaps a result of being in the zone.

It comes all the way back to $7.30, just above the original double bottom highs of $7.24, the price at which I started buying. I check the chart history for similar big moves higher followed by large corrections. These kinds of events are usually followed by a few more days of volatility and are not that easy to trade. I decide not to push my luck and don’t re-enter. I book a total profit on the scaled-in position of $3763. If I’d stuck to my original position and hadn’t added to it, my total profit would have been just $1155.

I end the week with a third attempt to add to my Newcrest (NCM) position. Unlike the other two, it doesn’t get stopped out. At the close, the original position is up 16c and my second addition is 2c in the money. I might finally have found the right entry level. I also buy Oxiana (OXR) today at 93c. I’ve always liked this stock and it’s a cheap and a less volatile opportunity to get gold exposure.

Pick up any self development book and you will invariably come across the story of the guy who failed and continued to fail until one day he got lucky and then became phenomenally successfully. They say the difference between a successful person and one who lives a life of mediocrity or failure is the ability to get over loss and rejection and start again. Becoming a successful trader involves frequent trips down that street. In a normal career, you face loss relatively rarely, but as a trader, loss is a regular and unavoidable fact of life. How you deal with loss will decide whether you survive and thrive or give up in despair.

When I first entered my losing phase I knew in theory that trading is cyclical, and that I would enter a new winning phase sooner or later.

In reality, though, I was fearful that I would not be open to the good times to come—the losses had been so consistent that losing money was starting to feel normal. After my visit with the trading coach last week and a couple of sessions of hypnotherapy, I felt that things were turning around, even though my account hadn’t made any progress. Until you start trading, you can’t realise the emotional importance of the experience. If you are trading and regularly losing money, and blaming this on your chosen system, it might be time to explore the losses, looking for an underlying emotional element that you may be reluctant to face. If it’s significant, I guarantee you won’t succeed until you’ve taken steps to deal with it.

The story so far:
Profit/Loss to date—$794 profit
This week:
Closed Trades— 16; Open positions— 14
Winners —8; Losers —8; Win/loss ratio —0.50
Biggest Loss —$526; Biggest win —$1532
Number of consecutive losing trades—3

This time last week my account was down over $4000. My account balance is now in the black for the first time since I started writing this book. Win/loss ratio not much improved, but there is a big difference in the size of my winning trades. I booked four trades with profits over $500 and two trades with profits over $1000.

What have I learnt?
I pat myself on the back for persistence. NCM was a good example. I kept trying to add, but getting stopped out. I stuck with it. My third attempt has been the most profitable so far. I don’t know how it will end up, but I like the fact I am not running scared when I get it wrong. Most traders give up on a stock too quickly when they get early trades wrong.

The winning cycle always returns, but the trick is to survive in the meantime. I lost a lot of confidence waiting for my losing streak to turn around, but with some sensible advice and mental ‘reprogramming’, I was able to prepare myself emotionally to make money again.

Do’s and don’ts
• Do keep abreast of the general index. This will tell you if you are trading with or against broader market sentiment.
• Increase your appetite for risk when you are already trading well. If a position is already in profit, adding to it is more likely to pay off. The middle and later stages of a trend are where the largest and fastest gains can be made.

Making Money in CFD Trading ($33.95) is available through the Intelligent Investor Bookstore or call 0800 345 675