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.
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