Online CFD Trading Strategies

Monday 28 April 2014

Why to go for long term CFD strategies?

CFD trading strategies have been rising in popularity among day traders of late. There are many factors that contribute to this trend. The most common question asked by the fledgling CFD traders is what strategies they should adopt to maximize their profits during day time trading. An expert’s advice on this matter can do wonders for them. Let us take a look at the top 3 contributors for the rise of the popularity of the CFD trading and what makes it different and more preferable over the other types.

The first reason is that there is no overnight financing involved in the contract for difference trading. There are two very big reasons why the CFD trading strategy has become so much popular among the short term day traders. One of them is that the financial rate is incurred when a position is held by the trader overnight. The cash rate normally stays around the figure of 2 percent. This means that if the cash rate is 5 percent then you are required to pay an amount of 7 percent calculated as the total day rate. However, there are ways using which you can avoid paying these amounts. You can declare your trading close before the actually ends. In that way, you will be able to evade from the CFD financial rates.

The second important aspect of CFD trading is that the day traders are provided a fantastic amount of leverage. This broadens the margin of profit and gives access to more money than actually there is in the account. For instance, if you have a total sum of 10,000 dollars in your account for day trading and you can trade only on that amount plus a move of 5 percent on that amount, which comes out to be 500 dollars. This way your profit percentage gets stuck to the figure of 500 only. On the other hand, in CFD trading, if you have the same 10,000 in your account and trade on a sum of 20,000 then your profit margin will go up to 1,000 dollars. However your loss margin also reaches the same level, so one must e careful about that.

The third reason for its popularity is the liquidity of the market. Contract for difference strategy is different from its counterparts that it mirrors the liquidity of the underlying stock options. While trading in CFD trading strategy, you will be able to get an in-depth access of the market and actually see closely the number of stocks still left for taking and their market value. What the day traders need is a high volume of stocks along with a complete transparency in the stock market which they get from the CFD trading. This helps them to make more informed decisions and manage their portfolio of investment as diverse as they want. Higher liquidity options and a reliable system is what that appeals most to the traders in the market place. Having the combination of these two factors is all they need to make profits.

About CFD Trading :

CFD Trading is a part of Trading Lounge ,which is an online trading analysis and education service that offers services such as Day Trading, Trading Strategies, Technical Analysis, and How to Trade advice by a reputable and experienced trading coach. TradingLounge.com.au was started by Peter Mathers in 1982 to meet the growing demand of accessible and sensible education in online trading.

A brief Look on CFD trading strategies

CFD trading stands for Contract for Difference and unlike normal trading gives an added advantage of leverage and instant access to over 10000 markets. CFD trading comprises of an agreement between two parties which binds them to exchange the difference between the opening and closing price of a contract. They are derivative products that lets you trade in live market price movements without owning the instrument underlying your contract basis. CFD allows you to analyze future movement of market price irrespective of the market rise or fall. CFD also lets you cash in while the prices fall so that you can maximize your profit. The number of markets available for CFD enables you to have more exposure.

There are several unique features to CFD trading making that makes it stand out from traditional trading. It gives the option to go long (buy) when the market is on the rise and to short (sell) when the market is expected to go on the downward slide. Thus CFD is a flexible alternative to trading according the fluctuations of the market as opposed to fixed trading and hence gives an opportunity to profit from both market rise and fall. CFD Trade lets you offset your losses as it can be very tax efficient and depending on the circumstances you can use losses to offset against Capital Gains Tax (CGT).

CFD recognizes the need for people to have 24 hour access to their trading accounts and grants it irrespective of where you are especially when the market prices are volatile. Thus one can always access their CFD trading account 24/7. It lets you trade in CFD even if underlying markets are closed. It has the feature of high leverage as it is traded on leverage. It means you pay only a small fraction of the total value of trade to open position which is called margin. However one needs to be careful as losses are magnified the same way as the profits are. CFD is stamp duty free enabling 0.5% saving on each transaction.

CFD trading strategies are designed to ensure consistent profit while trading in the financial market. One can formulate a successful trading strategy by having a simple and pragmatic approach. One strategy is to consider day trading with CFD. Due to its high level of liquidity CFD works particularly well for short time periods. It involves buying a large quantity of stocks where you incur charges only if you hold it overnight. Day trading allows you to close the position by end of the trading day without paying anything extra.

Money management strategy for CFD is useful for all traders. It determines the amount of capital for CFD trading and designates how much money to risk with each trade. A 2% risk is a good start and can be adjusted depending on market volatility. A trailing stop loss strategy is another very good CFD strategy. It essentially means that when you buy a stock expecting a certain profit you also deploy a trailing loss which indicates you have to sell regardless of the profit you can get if the price drops below a certain point. It lets you set a stop loss amount to check your losses. Thus CFD trading is a good alternative to normal trading.

About CFD Trading :

CFD Trading – what you need to know

CFD or Contract for Difference is a derivative product whose price is derived from the stock or index on which it bases its actions. They are very similar to regular stocks but in order to trade in them you need just a small amount of money. There is no ownership of physical stock in the transaction and there is no contract note given as you seen with regular trading activities in the share market. The trading happens in the difference between the price when you enter the market and the price when you leave it. Different types of people get into CFD trading. Trading in it is done by investors, intraday traders, swing traders, long, medium and short term trader, even those who are new to the stock market.

Benefits of CFD

People indulge in CFD trading in order to take advantage of the short term movement in share prices. CFD offer high leverage which enables them to earn a good profit. They can also trade in it to hedge their share portfolios. The lower commission rates in this trading are quite attractive. The kind of profits gained when markets fall is very good giving excellent returns. With a single account they can trade in various global financial markets which give them exciting opportunities to make a lot of money. Anyone who is over the age of 18 can trade in CFD. When the market is going through short term volatility, investors hedge their portfolios through CFD.

In CFD trading you can make very efficient use of capital money. Trading can be done using just margin, so you do not have to put money that amounts to the full value of a position. As all your money is not tied up in a single transaction, you can wisely invest it in other ways taking more advantage of the opportunity to make profits. Another thing is that you can trade on shares whose value is rising as well as falling and benefit through both trading opportunities.

Risks of CFD

Though CFD trading is quite attractive, you should also be aware of the risks involved in it. It is possible than you lose more money than what you have in the account. Though the winnings are high, the same can be said for losses. You have to use risk minimizing methods to avoid succumbing to them. When you sell short, there is an exposure to risk. The time to trade is short which can be tough. There are two ways in which you can trade in CFD which are direct market access or market maker model. You should talk to traders to find out which method they opt and why, so that you can decide which one to choose. When starting out in CFD trading it is best to select CFD instruments that are most traded because they offer the best prices and can be easily liquidated. The most popular CFD are the FX CFD and following them are indices, commodities and sectors.

About CFD Trading :

A Few Important CFD Trading Tips

CFD trading has become very popular because of the vast opportunities it provides when it comes to money making. It is easy to trade in CFD and does not require huge capital to start. If you are interested look into the following CFD trading tips before starting :

•If you have just initiated into CFD trading it is best to start with a small amount till you learn the tricks of the trade. Once you understand how things work you can increase the investment amount.. This will help to keep the losses low.

•Do not act on impulse. If you find a stock value going down, do not assume it will suddenly rise and place a bet on its price rise. This can be a big disappointment. Place bets based on reasoning and evidence rather than just take a decision because what you feel is right.

•Be disciplined because only then can you get expected results. Decide at what price you are going to enter into the trade and do not change your mind afterwards, even if it is tempting. Similarly, set exit points - one wherein you will leave the trade if it goes against you and the other when it favors you.

•Have a stop loss for every trade. This is very important because without it you will not be able to control losses, if the trade goes against you. Once you decide the limit stick to it because this works out for the better.

•Do not double up. This is something that traders do when they think that a trade can go against them. Double up is where more the same instrument is purchased or sold at a new price which is lower. At times this can work however in the long run it can cause a lot of losses.

•When a trade is losing it is best to get out of it as soon as possible. Do not stubbornly keep with the trade thinking its tide will turn. This can only result in more losses. When you sense a losing trade, get out of it immediately and stop any losses from hitting you.

•While cutting losses as soon as possible is important, you should also make the most out of profits. If you gain profits, wait for some time to gain more. Do not come out of the trade quickly as this can be negative for you.

•Keep monitoring positions at all time. Being diligent is how you can become successful. Just because you have stop losses and other limits in place it does not mean you can take a snooze. You have to keep checking positions so that you can react instantly to change and take advantage of a situation or cut losses.

These CFD trading tips are tome tested and have a track record of helping traders both novice and professionals. Though CFD trading is lucrative you have to tread the path carefully. Following the best trading practices is essential to becoming a successful trader.

About CFD Trading :

Thursday 13 March 2014

Introduction to CFD Trading

CFDs or Contratcs for Difference are a flexible method of trading on the price changes of products such as indices, shares, currencies, commodities and treasuries. Unlike buying shares, when CFDs are traded, one need not physically owe the product and does not have to pay its cost of ownership such as stamp duty or account management etc. This also indicates that you can sell and buy back the product at a later stage called as going short.

There are certain things to be kept in mind while trading CFDs. You must know that with all CFD providers tradable CFDs, margins and spreads may vary from time to time without bringing into notice with market maker. The commission given by market makers may vary or may be negotiable. There may be certain special offers running for exmaple, reduction in commission if you trade more than a specific number of times in a month. If you are trading with guaranteed stops they may not be present on every CFD that can be traded. So trading with a reliable CFD provider plays a very important role.

CFD trading has gained popularity among private players because of their flexibility as trading instruments. They allow trader to go long or short, protect existing positions and leverage their trades. In contrast to any other traditional share trading where one has to pay the full amount of share value through the broker to assure that you fulfill the conditions of the contract. The best way to understand CFD trading is to consider it as purchasing shares with a short term loan from your broker. You receive loan and pay interest on the taken amount on daily basis. But when the contract is terminated you have to pay the difference and reap the profits.

Advantages of CFD Trading

Allows you to trade on both rising as well as falling markets

CFD trading allows you to trade on the cost of a product both going up as well as falling down and try and reap benefits of both selling as well as buying opportunities. CFDs are used as a hedging tool by many investors to protect their current portfoilios from the risks of short term volatility.

Allows you to make use of your capital efficiently

One of the big advantages of Online CFDtrading is that it allows you to trade on margin which offers you leverage. This indicates that you do not have to put down the full value of a position while trading and since your money is not stuck up in one transaction, it can be used for further investments.

About Trading Lounge

Trading Lounge is an online trading, analysis and education provider that offers services such as Day Trading, Trading Strategies, Technical Analysis, and How to Trade advice by a reputable and experienced trading coach. TradingLounge.com.au was started by Peter Mathers in 1982 to meet the growing demand of accessible and sensible education in online trading.

Top Tips for Trading CFDs

CFD trading is based on common instinct underlying within everyone, the determination to succeed and to achieve something. This is a risky process as there are chances to gain profit as well as lose and therefore it is important to get a proper understanding of financial markets and a fair idea of trading.

Here are some Online CFDtrading tips for traders who want to place bet:

Start with small amount

Initially when you start off do not trade large amounts. There is plenty of time to establish yourself and chances of mistakes are high initially. While trading margin, losses can be more than your initial deposits. Trading comes with experience so remember to trade small amounts during the learning phase.

Avoid impulse trading

Many begginers will go through the chart, decide the lowest possible price and then place a bet going long inorder to buy because they asume that the price will go up. This is the most common mistake, the chart will always go down and the bet is actually placed against the trend without any indication that the trend is changing. You should always have a reason for your bets instead of trading on impulse as it could cost you a lot in the long run.

Decide the level to trade at

When you decide to trade CFDs or any other instrument, you should decide well in advance where you want to enter and exit a trade. Then be patient to wait for the price to achieve that level. Do not get tempted to buy or sell too early. Also choose two exit points – one where the trade has been in your favour and one where it has gone against you. Link these two levels with the help of a reward strategy.

Be aware of doubling up

Some traders start looking to double up when they come across a losing trade. This includes selling or buying more of the same instrument at a new lesser price, lowering down your average entry price. This strategy involves risk and might click once or twice but will generally result in more losses in the long run. Traders should only double up only when they have a very good reason to think that the trade will favour them.

Know when to exit out of a losing trade

Losing trades is inevitable, no matter how experienced trader you are. The tactic is to remain disciplined when you face a losing trade – you should cut losses immediately, instead of continuing in losses hoping that the trade will turn on your side. The mantra to successful trading is to keep those losses small when ever they occur and allow profits to run.

These are some of the CFD trading tips which can help you reap profits and minimize lossed while trading CFDs.

About Trading Lounge

Advantages of Long Term CFD Trading Strategy

Traders who want to play safe can adopt short term strategy so that they can protect capital and little profits slowly but definitely. However, there is another way for long term. Long term CFD strategies are considered as lesser form of leverage trading strategy and also tend to move with less volatile markets.

Although, this is not the case always. The things mentioned above will never stop any trader to go long term positions and take suitable strategies because there are some strategies that are particularly designed to meet the long term CFD needs. Furthermore, CFD trading strategy has its own advantage:

One of the advantages is that it can go along and experience larger movements in cost of a particular asset. This opportunity is not offered for traders having short term positions and adopting short term strategies.

Moreover, price movement in the short term or in the time frame of a single trading day is generally limited in a way that the prices are not likely to change drastically. While this can be taken as a protection for short term traders it also restricts the profits that can be collected.This applies even to the markets that are highly volatile. Unlike the level of prices or potential fluctuations in the market within a month's time, hike in the price can help a trader to earn a good amount of money.

Another benefit of adopting long term CFD trading strategy is that trading in this way will help trader to incur considerably lower transaction costs. This is a significant advantage that any investor will be considering in future. This could also be because of the fact that traders who are involved in trades with short lifespan have a tendency to incur more costs on broker fees and payments of commission as they do it more frequently than those trading in long term positions. Furthermore, though it is a fact that long term CFD strategies and systems exposes the trader to greater risks which can be eased with much lesser costs on each transaction.

About CFD Trading :

CFD Trading Strategies is one of the substitute of Trading Lounge,which is the online trading, analysis and education provider that offers services such as Day Trading, Trading Strategies, Technical Analysis, and How to Trade advice by a reputable and experienced trading coach. TradingLounge.com.au was started by Peter Mathers in 1982 to meet the growing demand of accessible and sensible education in online trading.