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Trading CFDs For A Living – Can You Make It Professionally?

Trading CFDs for a living would be the dream for many, but making it professionally on a full time basis will be a challenge that only the very few will be able to rise to.

Whilst it is possible to make a living trading CFDs, it requires a high level of skill and discipline, and also involves taking on significant risk, as the common tendency to overuse leverage can lead to losses that are hard to return from.

Successful traders typically have a well-defined strategy and carefully manage their trades and overall position. They also stay current on market developments and adapt their approach as needed. Making a living trading CFDs is certainly not for the inexperienced or casual trader and should only be pursued further by those who have the necessary knowledge and experience, and a track record of live trading successfully for a number of years.

trading CFDs for a living

What Are The Minimum Requirements to Begin Trading CFDs For A Living?

Firstly, you would need to educate yourself on the ins and outs of trading CFDs, including risk management and market analysis. Take some time to understand the tax implications, and the other basic needs you would have if you were to trade as a business.

It is then imperative that before you go out and get to work on the next step, that you take stock of what your performance has been like when you have been trading CFDs previously. If you have not got at least a solid few years of consistent trading with solid profitability, and ideally in changing market conditions, you should take some more time to gain experience. Make sure that your results reflect what you would need to see in order to replace any lost income should you begin trading CFDs for a living.

You will then require some basic equipment in order to trade on a day to basis effectively. See our detailed guide to what a solid day trading setup looks like.

Next, you would need to find a reputable broker with trading conditions that suit your trading style, and open a trading account with them.

Then, you would need to develop a solid trading strategy and stick to it consistently.

Finally, it is important to have realistic expectations and understand that making a living solely from trading CFDs may not be feasible for everyone. It takes time, dedication, and discipline in order to succeed in this field and unfortunately there are many more that fail than succeed.

How many people lose money trading CFDs?

It is difficult to say how many people lose money trading CFDs, as not all traders disclose their performance, and losses can be offset by gains in other trades. However, data from the Australian Securities and Investments Commission (ASIC) found that 79% of retail clients lost money trading CFDs in 2017-2018 which is also in line with averages provided during ESMA investigations in previous periods.

This data only serves to highlight the importance of carefully considering the risks involved, and making sure you are as well prepared as possible before making a decision to try earning a living trading CFDs.

Of those who make money trading CFDs, how much on average do they make?

Again, it is difficult to determine an exact average as not all traders disclose their performance and income can vary greatly depending on the account balance one has to trade with.

That being said, successful traders can make substantial profits from trading CFDs if they have the necessary skill and discipline to properly manage their trades and overall position, and have found some way to extract alpha on the market.

In some cases, this can lead to significant earnings, but of the 21% that aren’t losing money, maybe only 10% of those are earning enough to make a living out of CFD trading. That would put the total number of traders who are able to make a living trading CFDs at around 2% using the above figures.

Trading CFDs for a living with a Prop firm

One way that some traders begin trying to trade CFDs for a living is using a prop firm – which is where the firm provides the trading capital. This can be a viable career path for skilled traders who are willing to share some of their profits with the prop firm in return for reduced personal risk but it is still far from an easy task.

Prop firms are able to offer successful traders access to higher levels of leverage and trading capital than typical retail trading platforms for beginners, which can potentially lead to increased profits. There will also be a series of trading rules and guidelines in return which you must follow, typically relating to margin usage, drawdown percentages, and general risk management.

However, it is important for traders to thoroughly research and vet any potential prop firm before making a decision to partner with them, as not all prop firms operate ethically or effectively. If this is a path you are considering, it is crucial that you fully understand the terms and conditions of their agreement before starting out.

CFD prop firms will usually require you to pay an ‘entry fee’ for a trial account that you will get to trade on for a period, before actually approving you for a funded account thereafter, but be warned that there are some out there that have no intention of funding any accounts, and are running nothing less than a scam. Be careful in ensuring that any company you are entrusting with your money is deserving of your trust, and that means doing appropriate due diligence, and choosing a firm that has an excellent track record.