Cfd trading strategies and tips

Stock trading has been around for hundreds of years, but it has always been the market for those that are more financially stronger.

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5 CFD Trading Tips; Strategies Every beginner Should Know; 2020 Guide, cfd trading strategies and tips.

However, a lot of things have changed in the 21 st century, making stock buying & much more accessible to a “regular” citizen. In other words, you do not need to have millions of dollars in your bank account to make a transaction in this industry. With easy access to the internet and contracts for difference or CFD, it is not easier than ever to trade. Fortunately, learning about CFD is very easy because there is tons of information regarding the subject on the internet. There are so many different sources you can learn from.

5 CFD trading tips & strategies every beginner should know – 2020 guide

Stock trading has been around for hundreds of years, but it has always been the market for those that are more financially stronger. However, a lot of things have changed in the 21 st century, making stock buying & much more accessible to a “regular” citizen. In other words, you do not need to have millions of dollars in your bank account to make a transaction in this industry. With easy access to the internet and contracts for difference or CFD, it is not easier than ever to trade.

Nevertheless, just because it is accessible to you, me and everyone else do not make it simple or easy. You can buy and sell with a much smaller amount of money today, but it is still difficult to make a profit out of this as much as it was a hundred years ago.

However, there is no need to lose hope. Today, there is so much information regarding CFD trading, even a beginner could make some real cash out of it. To save you from all those common mistakes you can make as a beginner, I decided to write this guide and tell you about all the trading tips and strategies you need to know about.

Learn more about CFD trading

If all of this is very new to you, the first thing you should probably do is try to understand how this entire industry works. Once you get a good understanding of how it works, you can become a part of it. Otherwise, without any knowledge, you will just end up spending your money aimlessly and you will be left with no capital.

Fortunately, learning about CFD is very easy because there is tons of information regarding the subject on the internet. There are so many different sources you can learn from.

Once you are done doing research, you can start exploring different tips and strategies as a beginner.

Find a good strategy

If you want to be a traitor, you should never rely on luck. This might be the case when you do not have to listen to your gut. Instead, you should use logic to be careful how you invest your capital.

Stock buying or selling can be similar to gambling because there is a risk for you to lose all of your money. That is why it is very important to have a certain strategy and to invest your money as best as you can.

Before you make any kind of move, it is vital that you do some research first on the investment that you want to make.

To truly be successful as a traitor, you will need to find a good strategy. Naturally, you can also build your own strategy, but leave that to the more experienced players in the game. Right now, you are still just a beginner and you should treat yourself as such. Find a strategy that you believe will help you make a profit.

Once you find a strategy, make sure you properly learned and then stick to it no matter what happens. It is very important to stay true to your strategy because there will be moments when you will want to panic sell all your assets. The market is volatile and prices can easily go down and up. Whenever you see a significant price drop, do not panic and stick with your plan.

Pick the right stockbroker

The platform where you will be buying and trading assets is another very important factor that you must consider. Right now, there are probably hundreds of different platforms and applications that allow you to trade cfds.

However, not every platform can be good for you. There are some out there that might try to scam you out of your money or force high fees on you. As a beginner, you should probably look for a platform that has very low fees.

Obviously, it can be a bit difficult to find the perfect trading platform, but if you do a little research and check this or other similar websites, you might be able to find reliable CFD brokers in your area.

Always be ready to take action

As I already mentioned previously, the stock market can be very volatile sometimes and you always need to be ready for those spikes or drops in the prices. You cannot exactly know when they will happen, but you need to be ready.

That is why I believe it is best that you find a CFD trading website that has proper mobile device support or at least has an application for both android and ios.

With direct access to the market through your phone, you can always be ready to take action whenever it is needed. Obviously, I am not telling you to be paranoid and check how your account is doing every 15 minutes, but you should check it at least once a day. You should do that to ensure that everything is stable or whether you need to make some changes with the assets you already have.

Never go all in

There will be situations when you will feel tempted to put all of your money into a single stock or into a single company. No matter how lucrative it seems at that moment, I suggest that you never go all in. The reward that you might get out of that might seem quite good, but it is simply not worth it. With this kind of move, you could lose your entire capital, leaving you with nothing to trade with in the future. That is not how all those experienced players on the market have made their millions.

With patience, focus, and dedication, you can get very far with CFD trading as a beginner. Play it smart, always stick to your strategy, and be very careful with your capital.

There are probably hundreds of other tips or strategies I can share with you regarding this topic, but right now, I think these tips I shared are more than enough. You are still a beginner and you should not overwhelm yourself with too much information. I hope that this guide will be helpful to you.

CFD trading strategies – effective trading

Having reached a stage where you’re comfortable with what cfds are, how they work and the various different options that present themselves to you as a trader, it’s time to start looking further into the nitty-gritty that is trading strategy. Ask any accomplished trader whether or not he employs a consistent, repeatable strategy, and more often than not you’ll find the answer in the affirmative. Devising a strategy is a central component of successful, sustainable investment – anything else is either highly labour and time intensive, or bordering on guesswork.

Why do you need strategies to trade cfds successfully?

A strategy for investing is like a blueprint for building a house – without those instructions in place, it is hard to ensure you’re consistently hitting the mark, and that the pieces of the puzzle will readily fit together when the time comes. While strategies don’t have to be overly complicated, they are procedures best developed through a combination of knowledge and trading theory, and personal (and often bitter) trading experience.

In the forthcoming segment, we’ve attempted to outline the foundations of common CFD trading strategies for you, collating the collective knowledge of experienced traders to reflect a true and accurate position of some of the most widely used trading strategies and techniques in the CFD market. While it’s up to you which (if any) you choose to implement, it is nevertheless important to bear in mind the value of experience, and to take advantage of the mistakes others have made before you to prevent losing your capital unnecessarily.

Learn from experience

Likewise, there is really no substitute for experience when it comes to trading other than the knowledge of those that have gone before you, and there are invaluable lessons to be learned from devoting time and energy to reading up on trading do’s and don’ts. Like most things in life, there are certain fundamental trading lessons that it pays to learn in the theoretical sphere before you launch unsuspectingly into the markets to learn the hard way.

While there are no hard and fast formulae to which you must adhere when trading cfds, there are certain fundamental trains of thought that have served traders well over the years, and it pays dividends to familiarise yourself with these strategies – if not for personal profit, to give you an insight into the possible mindsets of other traders. So without further ado, here are a few of those key trading strategies, tips and techniques that will stand you in good stead in your future trading efforts.

Why is it important?

One might think why it’s so important to have a trading strategy, think again. One has to follow the plan and stick to it. No matter if the markets go south or north, you have to be prepared for it and that’s where the strategy comes into play as you can weather the storm without paying much attention. You know your goal and you stick to it.

Always remember, it’s your money on the line and you have to stay disciplined and dedicated, make sure you’re in control and stick to your own strategy; otherwise, it’s pointless. Discipline and experience are the vital ingredients which will turn your losing trades into the winning ones.

5 tips for simple CFD trading strategies

If you are interested in CFD trading and wanting to learn how to make money from trades, here are a few tips and tricks to help.

Trading any asset – whether cryptocurrency, stocks or forex – is a fantastic way to raise your capital and padding your income, especially now as things are financially uncertain across the world. Contract for difference (CFD) trading has become a popular way of buying assets through a broker rather than purchasing them directly.

While CFD trading might have a sense of security that direct trading lacks, there is still complexity in how to trade. To make the most money for your time, it’s a good idea to gain a solid foundation of understanding of the strategies of CFD trading. If you have the best methods in place, you are more likely to see a good return on your trading investment.

If you’re just starting out, or are wanting to add to your CFD strategies, here are a few tips and tricks to help:

1. Aim for consistency: find and use a strategy you can maintain

Trades which happen and make a person millions on a “gut feeling” are rare and the exception. If that was the case more often, trading would be based on far more luck and the industry would be a lot more like gambling than anything else. Instead, the rule of thumb is to be a lot more strategic and to figure out what works and stick to it. This goes hand in hand with doing consistent research on your trades. Keep an eye on the market and seek to improve your trades every time you invest.

2. Keep a level head and don’t readjust too often

With your CFD, you want to stick to the plan you set out initially as much as possible and not panic sell or buy based on volatility. But there are times when shifting your strategy is necessary. Trading is all about keeping level-headed and not making emotional decisions based on volatile swings or market sentiment. Rather than sticking to your trades out of stubbornness and buying over-enthusiastically, keep your CFD levels under control and base your decisions on facts not feeling. Always remember: what comes up might also come down, and you don’t want a falling CFD to take your gains and capital with it.

3. Look after your initial capital

As a beginner, your goal shouldn’t be to make more money, not at first. Rather, you should aim to not lose the money you have. Instead of learning how to gain, learn how to avoid losing your money and then when you’re more familiar with the market, you can aim to increase. A good defensive trading strategy is a fantastic way to learn the ropes without risking your capital. When you feel comfortable, you can up the ante and take a more risky approach.

4. Don’t be shy to ask for advice

Everyone started as a beginner and learnt some lessons the hard way. Aim to learn from other’s mistakes and ask for help if you need it. There are platforms available which have a wealth of CFD trading resources. The more you engage with additional resources while making modest trades, the more you can learn both theoretically and practically.

5. Be cautious with your money

The trading industry has countless experienced traders who are able to spot a trade based on another person’s mistake. To mitigate mistakes, learn to be patient with your trades and build your experience in trading before making any bold decisions.

As with all trading, make sure you are aware that any investments you make are not guaranteed, and there is risk involved with CFD trading. Bear the above points in mind and make any mistakes earlier on your trading career rather. That way, the lessons will come at an affordable price with minimal risk.

Posted: nov 19, 2020 author: becky categories: trading guides

5 CFD trading tips and strategies for beginners

Contracts for difference or cfds are in the class of derivatives assets, which allows a trader to speculate on various financial markets such as indices, forex, cryptocurrencies, and commodities, without the need to own a piece of the underlying asset. In the open and closing period, the contract will pay the difference in the settlement price. CFD strategies allow for versatile trade options for traders.

Leveraged cfds are potentially risky as this type of trading hikes market exposure and expand both the potential for losses or profits, depending on the market’s direction. As a beginner in trading cfds, you need to strategize before you invest.

Advantages of cfds are:

You can access global financial markets

You do not need to purchase an underlying asset at its full value

You have flexibility in trading in rising and falling markets

You have access to leveraged trading

There are no particular contract expiry dates

Some tips for strategizing include:

1. Learn about cfds

Derivatives are products that provide access to assets that you would otherwise not afford and promotes market efficiency. These derivatives also have volatility risks, and before trading in cfds, you have to understand the market.

You must understand the underlying markets, such as commodities, forex, or equities. For example, the cfds price relies on the supply and demand of an underlying currency pair, such as the dollar and the pound. At the same time, forex trading depends on other factors that are likely to affect the currencies’ value.

Contract sizes for forex cfds are different from oil cfds since commodity CFD for oil gives room for traders to speculate on futures contracts. Forex cfds give space for speculation of spot forex pair rates.

2. Consider all the necessary factors

Your risk appetite, trading objectives, financial knowledge, timeframe, and trading capital are some of the factors that you should consider before you develop a strategy. Acknowledge that you have weaknesses as well, and even if you are experienced in different trading markets, trading in cfds might need a different outlook and approach.

3. Focus on preserving capital

In the beginning, strategies for trading cfds need to concentrate on preserving capital. Each cent you spend is valuable, and you must reduce your losses by avoiding any risks. When starting, focus on using a demo account, where you can learn and test different strategies. As you gain experience, you can try being more ambitious in your approach.

4. Use a regulated broker

When trading, you need to be in the right frame of mind to avoid making losses. A regulated broker ensures your funds are safe and provides guidance and trading resources. Look for a broker with these features:

High-level trading platforms such as forex metatrader

Various financial instruments

Several trading tools

Reputable liquidity providers

ECN pricing

5. Choose the right leverage

Leverage allows you to get more gains from tiny price movements in the underlying asset. If for any reason, the market moves in a different direction than expected, it can increase losses, so you must choose your leverage ratio with wisdom. For a beginner, choose ratios such as 50:1 or even 100:1. Consider this tip for shares and indices, which possess lower liquidity and volatility levels than the forex market.

Conclusion

CFD trading needs a strategy if you are a new trader. If you ride on the knowledge and experience gained from other markets, it might lead to your downfall. Techniques such as the right leverage will keep you trading for more extended and earn your profits.

Look for a regulated broker who will guide you in your journey and advise you against making poor choices. Please do your due diligence on the broker and ensure the firm is trustworthy before engaging them.

Remember to test your strategies using a demo trading account. If you have discipline and patience, your careful approach will bear fruits. Avoiding risks as a new trader is the only way to avoid losses and make profits while at the same time gaining experience.

CFD trading tips – how to become A better trader

Top tips to improve your trading

Do let your profits run

If ever there were a central principle by which to live your CFD trading life, this has to be it. Let your profits run at every available opportunity. Profits in CFD trading aren’t always easy to come by, and numerically those that turn out for the best will probably by dwarfed in comparison to those that don’t turn out quite how you’d expected. This makes it essential that you allow profitable, winning positions to continue to run on and on as far as possible. While every ounce of your instinct will at first tell you to close and bank a profit, the more money you milk from each winning trade, the best chance you’ve got of succeeding overall.

Do cut your losses early

Similarly, it’s essential that you realise as soon as possible that losses are a drain on your resources and need to be cut out of the picture as soon as they can. The more ruthless you are in cutting losses, the better chance you’ll have of making an overall profit. When it comes to a game of aggregated, one down on the negative side is as important as one up on the positive side, so it pays to take positive steps towards ensuring your downside liability is minimised. After all, if you intend to sell your position in an hours time if it loses an extra 5%, aren’t you better off just saving that 5% loss, taking your medicine and settling right now?

Do constant research and reading

Whatever you do day to day, make sure it involves constant research and reading up on the markets you trade, global current affairs and politics. This is a game of knowledge, and the more you know, the more likely you are to have the capacity to make the best possible trading decisions. Some trading signals can only be identified through experience, and there’s no substitute for real life when it comes to the learning curve, but by making sure you’ve got the theoretical knowledge down, you can be more confident in your abilities as a trader to identify the low-hanging fruit that can make you fortunes.

Do diversify your exposure

Make sure your capital isn’t all tied up in cfds or in specific sectors or even specific countries – do make sure you take a diverse approach to split the risk over as many different markets and instruments as possible. Cfds are great, but if they represent the entirety of your worldly fortunes you’ll have problems. In much the same way that businesses can’t become too reliant on one client or supplier, so too should you ensure you diversify your trading capital across a number of different investments to make sure that even in worst-case scenario, your capital is protected. It’s all about protection of capital, because after all, it is only your capital that is capable of generating your returns.

Do set time limits

Trading costs with cfds can often get out of hand when they are left to their own devices, primarily because financing charges are applied daily overnight. Setting strict time limits by which you should expect to realise your profit is important in keeping a firm grip on your positions, and you should take care to set and stick to time limits and earnings targets for determining performance. This is the only means in which you can regulate your trading performance, and as with the research point above, the more you know (in this instance about your own portfolio), the better your chances of succeeding in the markets over time.

Do use leverage sensibly

Leverage is a central part of trading cfds, an inescapable feature of the transaction that is in practicality its raison d’être. Gearing up the size of transactions in order to effectively up the ante, we all know leverage can be extremely dangerous when things don’t work out, but using it to sensible, effective use can provide real benefits for your trading portfolio. A cautiously leveraged portfolio can have the best of both worlds – exposure to the high potential gains afforded by leverage on aggregate, with a cautious enough approach to preserve capital resources. That means strategies like leveraging only to gear up your transaction capital rather than scaling up your entire account, which would be too risky, and backing positions that have become winners more heavily to maximise yield. Leverage can be a heavy burden to bear, but it doesn’t have to be – remember it’s a tool best used sparingly, and you should help skew the risk/reward ratio slightly more in your favour.

Do make use of stops

Cfds can be highly volatile, and the slightest bump in market prices can often send much more significant shockwaves through the CFD markets. While CFD trading is naturally and by design a risky business, it is possible to minimise the extent of those risks both through the way you trade, and through the way you make use of stops. Stop losses and limits are central to a cautious, realistic trading approach, and they can help save serious capital damage while allowing profitable positions to fully flourish. While stops do usually attract an additional cost, making use of stops to prevent your capital from becoming too exposed to leveraged trades is the first step towards a robust, risk-managed CFD portfolio. Particularly as a new trader, stops will be crucial in preserving capital and earnings during your initial learning period.

Do know your trading costs

CFD trading isn’t like spread betting, where all the costs are transparent in the transaction – there are in fact a number of different layers of trading cost that can factor in, depending on the makeup of your transaction and your particular broker, and so it is essential to make sure you have a knowledge of these costs and how they will affect your ability to deliver a profit on a particular transaction in order to allow for informed investment decisions to be made. Particularly for traders contemplating holding a CFD position for over one day, the daily increasing financing charges quickly mount up, and can quickly become a significant handicap on the trade. That’s why it’s important to know what you’re paying, and to calculate your financing and trading costs, in line with your trading strategy, to decide whether or not a trade is viable.

Do set profit expectations

Most amateur traders start off with no real profit expectation. They launch into the markets and hope for the best, and with a bit of good luck take any profit they can get. Unfortunately, for serious traders, life can’t be that simple. Profit expectations perform a central role in the business side of your trading activity. Portfolio management is a business, and as a trader you need to make sure you operate in as professional a way as you can to give the best chances of success. Profit expectations are like sales forecasts – they define what you want to achieve, so you can then calculate cash flow and make further predictions, forecasts, and revisions to strategy. For best effect, look at the size of recent market price movements in the underlying market for your CFD and crunch the numbers to deliver a rough outline of what you could justifiably expect to return.

Avoid mistakes of others

Don’t overleverage

Don’t fall into the all too common trap of overleveraging on a transaction. Overleveraging occurs where you ambitiously take on too much leverage in a position than you can afford to personally meet, and as a rule of thumb, you shouldn’t be leveraging up beyond what you can personally afford to fund. Leverage is a tool for trading, not for gambling, so make sure that you apply it in stages to help amplify your account where possible, rather than using it to drive the whole ethos of your trading. The more significantly leveraged you are, the greater the chances of trading disaster – when in doubt, keep your positions small. Slow and steady always wins the race.

Don’t lose more than you want to gain

As you embark on each trade, you will have an expectation of the sort of profit portions you’re looking to take from the transaction. Depending on the market and the amount of capital and leverage you have exposed to the position, this may be a substantial or minimal return. But as a crucial rule of thumb, having established this expectation, don’t accept a loss that is greater than what you would have taken as a profit. Assuming that probability is on your side is dangerous, and hanging on for a recovery is amongst the worst trading mistakes you can make. Don’t ever let a position get to the stage where you’re having to swallow humble pie with a loss larger than the profit you would’ve been satisfied with from the very same trade – it does nothing for morale, or your wallet.

Don’t overtrade

Similar to overleveraging, overtrading is when you engage too much of your capital at any one time. So, rather than being too heavily exposed to one position, your account is too fat, with too many different positions (and potential liabilities) operating at one time. Finding loads of different trading opportunities is great, and shows that you must be doing research with some volume of output. However, in the event that you have multiple positions, it’s often better not to spread yourself too thinly, for fear of burdening yourself with any number of active positions that could quickly head pear shaped. Especially when leverage is thrown into the mix, it simply isn’t worth your while to take on too sizeable a portfolio.

Don’t get emotionally attached

Traders all too often fall into the trap of thinking that they’ve been unlucky, or that markets will correct in time to balance out in their favour. Karma doesn’t exist when it comes to CFD trading, but leverage most certainly does, and it can slap you ferociously if you end up becoming emotionally connected to your positions. Realise that trades are transient, and one day company X might be up while the next company X might be down – this doesn’t matter. What matters is that you are dynamic enough to make money on both the up and the downside, and having sufficient discipline to understand when to draw a line under a loss and move on.

Don’t chase your losses

Finally, loss chasing is the single biggest error you can make as a trader, yet it’s one that feels all too natural, if not counterintuitive. The tendency is, having invested time and effort in researching positions, to assume that the markets have yet to come round to your way of thinking. As a result traders keep funding obvious losses, and keep adjusting their margin requirement to continue to fund the position as it continues to lose money – in the hope that it will eventually return. Chasing losses is nonsensical – you’re simply throwing good money after bad. Cutting out as quickly as possible and allowing losses to lie where they fall is central to good portfolio management.

Don’t set stops too tightly

When setting stop losses, there is a tendency to get a little overcautious. Obviously the amplification of leverage makes each incremental price drop a significant concern, but it takes a cool, objective head to determine how the market might behave in the near future to set stops accurately. The balancing consideration is that if stops are set too tightly underneath the market price, trades will be closed automatically and unnecessarily, at great expense and inefficiency to your trading account. While stops are there to prevent loss, its important to always allow for some breathing space in your position, as opposed to setting a stop immediately underneath current market prices. The extent of the breathing space you’ll require is dependent on the volatility of the market, and any other factors that might prompt a price jump in either direction, but nevertheless the principle of balancing these needs is an important one to bear in mind.

Don’t gamble with your capital

Cfds are often described by the ill informed as high-risk, market ‘gambling’ type investments. Gamblers lose eventually because they take unmerited risks – they gamble. Investors invest. Traders trade. There is a stark difference that must be upheld – in gambling, forecasting outcomes with any certainty is not possible. There are two many variables, and while skill may play a part to a certain extent, it is proportionately offset by the role of chance. In CFD trading, you can make gambling-like earnings, but you have to work for them. That means researching trades before you jump in, and making sure you reason out why you’re making a particular trading move. Make sure you don’t ever gamble with your capital, supporting a position because you have a good feeling about it or because you want to support it. CFD trading isn’t about chance – it’s about knowing your stuff and making shrewd decisions based on measurable market data.

Don’t feel the markets owe you

A common tendency amongst aggrieved traders is to feel that they are due a return, or their owed a lucky break from the markets. This mindset, which assumes that market outcomes are random, or chance driven, leads to silly trading decisions, and clouds the judgement of the trader in making calls on the directional market movements. In reality, while there may be some elements of chance to the markets along the way, the overwhelming force of markets responds in predictable ways to a number of prompts – the magic of calling it lies in weighting these often contradictory prompts to decide which way the market is likely to move. This simply can’t be achieved by feelings of being denied opportunities on some idea of fate or luck – the markets don’t owe you a penny, and every winning trade you make will be hard fought and hard earned.

Final note: the tips are not easy to follow as they take discipline, time, and determination; but eventually, hard work always pays off.

CFD trading strategies & examples

Work through our example of a winning and losing CFD trade.

Trading on the wall street index

To illustrate how CFD trading works, let’s look at an example where there is an opportunity in the wall st, city index’s equivalent price for the dow jones.

The wall st index is currently trading at 20609.0 /20610.6. Remember, the first figure is the sell price and the second is the buy price.

Going long

You think trump’s corporation tax reforms will benefit US stocks, so you expect the wall st index, city index’s equivalent price for the dow jones, to rise.

City index quotes you a spread of 20,609.0 / 20,610.6 for the wall street CFD. You decide to buy 5 cfds. This is known as going long.

The city index platforms will calculate the margin required to open the trade.

The current market price rises above your buy price of 20610.6

Remember, the higher the value of the trade, the more money you need to deposit. You should always make sure that you have enough free equity in your account to sustain any losses and avoid being placed on margin call.

It is important to note that any margin requirement, financing and any unrealised profit or loss will be in the base currency of the selected market, in this case US dollars. Once the trade is closed, the P/L crystalizes in your account in the base currency of that account.

Winning trade

Good news: following an announcement by trump on his tax reforms, the wall st index rises as you predicted. The wall st index price is now 20,666.0/20,667.6

Having reached a comfortable level of profit, you decide to close out your position with a profit and you sell at 20,666.0.

The trade equates to a 5.4% return on investment on your initial outlay.

Losing trade

Let's look at what would have happened if the wall street index had fallen instead.

Supposing the wall street index falls to 20,544.0/20,545.6, putting your CFD position into an open loss.

Deciding to cut your losses, you now close your trade at the new sell price of 20,544.0. This represents a 66.6-point loss in your trade which, when multiplied by the 5 cfds, leaves you with a $333 loss.

As you hold a long position, financing will be automatically debited from your account every night for the period that you hold your position.

CFD equity trade: going short twitter

You believe that twitter shares will fall over the coming weeks as the company is set to report a disappointing set of earnings. You decide to sell 200 cfds.

Please note, overnight financing will be debited or credited from your account every night for the period that you hold your position.

City index quotes a price of 16.05/16.06 for twitter.

You were right and the share price of twitter falls to 14.09/14.10. Three days later you decide to lock in your profits and close the trade.

The above trade equates to a 105% return on investment on a share price movement of 12%.

Losing trade

Supposing twitter had risen instead?

Some hours after placing your trade you see that twitter has rallied. Thankfully you had your stop loss in place which cut your losses at the price of 18.05.

Financing will be automatically debited or credited from your account every night for the period that you hold your position.

Quick links

What is CFD trading?

How to trade cfds

CFD trading examples

Costs of CFD trading

Risks of CFD trading

CFD trading vs shares dealing

CFD markets

What is CFD leverage?

Margin and leverage

Start CFD trading

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Cfds are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading cfds with this provider. You should consider whether you understand how cfds work and whether you can afford to take the high risk of losing your money.

* spread betting and CFD trading are exempt from UK stamp duty. Spread betting is also exempt from UK capital gains tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

† 1 point spreads available on the UK 100, germany 30, france 40 and australia 200 during market hours on daily funded trades and cfds (excluding futures).

‡ voted “best trading platform”, “best mobile application” and “best spread betting provider” at the OPWA awards 2019. Voted “best professional trading platform” and “best spread betting provider” at the 2019 shares awards. Voted “best CFD provider” at the ADVFN international financial awards 2020.

City index is a trading name of GAIN capital UK limited. Head and registered office: devon house, 58 st katharine’s way, london, E1W 1JP. GAIN capital UK ltd is a company registered in england and wales, number: 1761813. Authorised and regulated by the financial conduct authority. FCA register number: 113942. VAT number: GB 887 937 443. GAIN capital UK ltd is a wholly-owned subsidiary of stonex group inc.

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Breakout trading forex strategy

Forex traders and market analysts are constantly creating new strategies to find the best time and point at which to enter or exit a trade. These are ten of the most popularly used strategies for trading currency pairs.

Bollinger band forex strategy

A bollinger band strategy is used to establish likely support and resistance levels that might lie in the market.

The bollinger tool consists of three bands: the central line is a simple moving average (SMA) set to a period of 20 days, while the upper and lower lines measure the volatility on the market. If the forex market is highly volatile, the bands will widen, and if the market is more stable, the bands will get closer together. When the price reaches the outer bands of the bollinger, it often acts as a trigger for the market to rebound back towards the central 20-period moving average.

Forex traders can identify possible points of support and resistance when the price moves outside of the bollinger band. When this happens, either the market will break out of its range, or the move will be temporary and eventually the price will return to the direction it came from. The bands help forex traders establish entry and exit points for their trades, and act as a guide for placing stops and limits.

Learn more about trading with bollinger bands

Momentum indicator forex strategy

The momentum indicator takes the most recent closing price and compares it to the previous closing price. It is then displayed as a single line, usually on a separate chart below the main price chart.

The indicator oscillates to and from a centreline of 100. How far the indicator line is above or below 100 indicates how quickly the price is moving. For example, a reading of 102 would indicate the market is moving more quickly upward than a reading of 101, while a reading of 98 would indicate the market has a stronger downtrend than a reading of 99.

Momentum indicators can be a useful tool when providing overbought and oversold signals. Forex traders can use it to identify the strength of the market movement, and whether the price is moving up or down.

It is important to ensure that the market has respected the momentum indicator on previous occasions and find the exact conditions that seem to be working.

Fibonacci forex strategy

Fibonacci retracements are used to identify areas of support and resistance, using horizontal lines to indicate where these key levels might be.

These fibonacci retracement levels are drawn as six lines on an asset’s price chart. The first three are drawn at the highest point (100%), the lowest point (0%) and the average (50%). The remaining three lines are drawn at 61.8%, 38.2% and 23.6%, which are significant percentages in the fibonacci sequence.

Forex traders can use the fibonacci indicator to spot where to place their entry and exit orders. The trick is to place your stop-loss below the previous swing low (uptrend), or above the previous swing high (downtrend).

Bladerunner forex strategy

The bladerunner forex strategy compares the current market price to the level the indicator says it should be. By looking at this disparity, traders can identify entry and exit points for each trade. The strategy is named because it acts like a knife edge dividing the price – and in reference to the 1982 science fiction film of the same name.

The bladerunner strategy is based on pure price action, combining candlesticks, pivot points, and support and resistance levels to locate new opportunities. Before you start to use the bladerunner strategy, it is important to make sure the market is trending. Typically, traders will combine the bladerunner strategy with fibonacci levels, to validate their strategy and give themselves some extra security when trading.

The strategy uses a 20-period exponential moving average (EMA) or the central line of the bollinger band indicator (described above). If the price is above the EMA, it is taken as a sign that it will decrease soon, and if the price is below the EMA, it is seen as a sign that it will increase in the near future.

A trader would wait for the price action to reach the EMA, at which point the theory suggests it will rebound.

The first candlestick that touches the EMA is called the ‘signal candle’, while the second candle that moves away from the EMA again is the ‘confirmatory candle’. Traders would place their open orders at this price level to take advantage of the rebounding price.

Moving average crossovers forex strategy

A crossover is one of the main moving average strategies, which is based on the meeting point or ‘cross’ of two standard indicators. In a standard moving average, the price crosses above or below the moving average line to signal a potential change in trend. But, the crossover strategy applies two different moving indicators – a fast EMA and a slow EMA – to signal trading opportunities when the two lines cross.

An FX trader would enter into a long position when the fast EMA crosses the slow EMA from below, and enter into a short position when the fast EMA crosses the slow EMA from above.

The placement of stop-losses is also determined by this strategy. The stop-loss for a long position would be placed at the lowest price point of the candlestick before the crossover occurred, while the short position stop-loss would be placed at the highest price point of the candlestick before the crossover.

In our example below, the blue line is the fast EMA, set to a nine-day period, while the red line is the slow EMA – set to a 14-day.

MACD forex strategy

MACD stands for moving average convergence divergence. The basic aim of a forex strategy that uses the MACD is to identify the end of a trend and discover a new trend.

Like the momentum indicator, the MACD appears at the bottom of the main price chart. It consists of three parts: the MACD line, the signal line and the histogram.

The MACD is a momentum indicator that plots the difference between two trend-following indicators or moving averages. As the two moving averages converge and diverge, the lines can be used by forex traders to identify buy and sell signals for currencies – as well as other markets like commodities and shares.

When the MACD line crosses above the signal line, it is a buy signal, and when the signal line crosses above the MACD line it is a sell signal. In the below chart, the MACD line is blue and the signal line is red.

Keltner channel forex strategy

The keltner channel is a volatility-based trading indicator. Forex traders can use a keltner channel strategy to determine when the currency pair has strayed too far from the moving average.

Like the bollinger band indicator, the keltner channel uses two boundary bands – constructed from two ten-day moving averages – either side of an exponential moving average. Traders can use the channels to determine whether a currency is oversold or overbought by comparing the price relationship to each side of the channel.

The theory goes that by plotting the bands a certain distance away from the average of the market price, a trader can ascertain a significant market move. If the market moves through the boundary bands, then in all likelihood the market price will continue to trend in that direction.

Fractals indicator forex strategy

Fractals refer to a reoccurring pattern in the midst of larger price movements. The fractal indicator identifies reversal points in the market, found around key points of support and resistance. Forex traders can use a fractal strategy to get an idea about which direction the trend is heading in by trading when a fractal appears at these key levels. Fractals occur extremely frequently, so they are commonly used as part of a wider forex strategy with other indicators.

The fractal pattern itself consists of five candlesticks, and it indicates where a price has struggled to move higher or lower. A fractal must have a central bar that has a higher high or a lower low than the two bars on either side of it.

In an upward fractal, the focus is on the highest bar, and in a downward fractal, the focus is on the lowest bar. A forex strategy based on the fractal indicator would trade if the market moves beyond the high or low of the fractal signal.

RSI indicator forex strategy

The relative strength index (RSI) is a popular technical analysis indicator used in a lot of trading strategies. The RSI helps traders to identify market momentum and overbought or oversold conditions.

The RSI indicator is plotted on a separate chart to the asset price chart. It consists of a single line and two levels that are automatically set.

The vertical axis of the RSI goes from 0 to 100 and shows the current price against its previous values. If the price rises to 100, this is an extremely strong upward trend, as typically anything above 70 is thought of as overbought. And if the price falls to 0, it is a very strong continuous downtrend, as anything below the level 30 is considered oversold.

This forex strategy would be based on taking advantage of the market retracements between these price levels. However, it is important to use the indicator as part of a wider strategy to confirm the entry and exit points, as sharp price movements can cause the RSI to give false signals.

Breakout trading forex strategy

Breakout trading involves taking a position as early as possible within a given trend. A breakout occurs when the market price ‘breaks out’ from a consolidation or trading range – this is typically when a support or resistance level has been met and surpassed.

Trading breakouts is an important strategy, especially in forex, because the movement represents the start of a volatile period. By waiting for a key level to break, forex traders can enter the market just as the price makes a breakout and ride it until the volatility calms down again.

Commonly, breakouts occur at a historic support or resistance level, but this could change depending on how strong or weak the market is. Your stop-loss should be placed at the point the point the market broke out.

Using a breakout trading strategy relies on being able to see the volume of trades that are taking place on the market. However, there is no way of knowing the volume of trades made in the forex market, as it is decentralised. This makes it imperative to have a good risk management strategy in place.

Forex tips: what you need to know before trading

Before you start to trade forex, it is important to have an understanding of the market, what can move its price and the risks involved in FX trading. Here are a few tips to get you started:

Take the time to research the forex market

It is important to research the forex market before you open a position as the market works in a different way to the majority of financial markets.

Forex is bought and sold via a network of banks, rather than on a centralised exchange. This is called an over-the-counter (OTC) market. The banks act as market makers – offering a bid price to buy a particular currency pair, and a quote price to sell a forex pair.

The forex market is spread across four major trading centres: london, new york, sydney and tokyo. This means that the market trades 24 hours a day.

Learn about the factors that influence currency prices

Making predictions about the future price of currency pairs can be difficult as there are many factors that could cause the market price to fluctuate. Like most financial markets, forex is primarily driven by the forces of supply and demand, but there are some other factors to bear in mind:

Central banks. Decisions made by central banks can impact the supply of a currency, so any announcements tend to be followed by fluctuations in the market

News reports. Positive news can encourage investment in a specific currency, while negative news can decrease demand

Market sentiment. The mood and opinion of traders can play a major role in currency price movements, and often cause other traders to follow suit

Make sure you understand the risks

Although the forex market presents a wide range of opportunities, it is important to understand the risks that are associated with it. The forex market is extremely volatile, due to the large volume of traders and the number of factors that can move the price of a currency pair. Traders should always be mindful of political, economical and social events that can cause fluctuations of a pair’s price and create a risk management strategy to avoid unnecessary losses.

Publication date : 2019-05-20T14:51:00+0100

This information has been prepared by IG, a trading name of IG markets limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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Spread bets and cfds are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and cfds with this provider. You should consider whether you understand how spread bets and cfds work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

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Short-term strategy for CFD trading

Looking for a good way to gain some profit from the stock market? Contracts for difference might be the best option for you. It offers a good number of advantages when it comes to stock ownership. Also, CFD trading can be utilized under traditional trading strategies and should magnify your gains after a short while all due to the gearing of available funds. In CFD, you will only have to pay 10% or even less on the actual value of the asset that you are trading. The rest of the funds are ‘on margin’. Additionally, if you are in a country where stamp duty is required for stock ownership, then you can save something since trading cfds won’t require you to pay for stamp duty as you don’t own the actual underlying asset.

Cfds are for short-term trading

Contracts for difference are particularly suited for short-term trading, meaning, trades that go on for a couple of minutes to a week or two. Not just because CFD is a margined product but also because of the exemption on stamp duty in ireland and the united kingdom. Because of this, you immediately saved 0.5% that you won’t gain if you buy the actual underlying asset. For this particular reason, CFD is really cost-effective and CFD brokers will only charge you as little as 0.1% for opening trade and another 0.1% when closing a trade.

Focus on few markets when trading CFD

If you are thinking of trading short term in CFD, it is much better to put your focus on a few markets only until you fully understand the movements and you have conceptualized the right strategy to use. After a while, you will come up with a better strategy and you can start to widen your market. Trading with a trend is also a good strategy to start with. Using CFD, it’s possible that you can easily double your money with the use of this technique.

But one thing about using CFD is the interest being charged to you for keeping a position open overnight or even for a much longer time. CFD, unlike other similar derivatives like options and futures, don’t set an expiration date. In case of holding a winning position, you won’t fear that your positions will be closed. As you are on your winning streak, your account continues to get credited every day as long as you have ‘marking to market’ a process in which there is an increase in the value of your position.

Reminder: always utilize cfds responsibly

Large leverage also comes with great responsibility. Therefore, you need to see to it that you don’t suffer great losses, something that you cannot take. CFD trading can result in getting a ‘margin call’ if the market value falls. If this happens, you may need to send your broker more funds to continue with your position and might close it resulting in a loss on your side. As much as possible, trade only with the amount present in your account and leave the rest in case such a call arises.

CFD trading – timely tips for beginners

CFD trading – timely tips for beginners

CFD trading – timely tips for beginners

Do you have an interest in online trading but are sure of where to start? Trading CFD is one of the best trading options for beginner traders in the online market today.

As a CFD trader, you do not own the assets on trade. Instead, you pay or collect the selling price and the buying price difference for the asset or assets you are trading. This makes CFD trading one of the most secure investment options for traders interested in making money in a short time.

To be able to trade cfds, you will need a trading software. You can download metatrader4 on multiple platforms to enjoy CFD trading. Here ate timely tips to get you started on CFD trading online.

Best tips for online CFD trading

As a beginner, having a winning trading strategy is one of the most important aspects of trading. A winning strategy is the only sure way of ensuring your investment makes money instead of losing it. When it comes to CFD trading, there are numerous tips and strategies you can follow.

Below are the best tips for CFD trading that can help you in investing your money wisely.

CFD trading – timely tips for beginners

Preserve your capital

Ensuring that you preserve your investment is an important trading strategy to go by. When trading as a beginner, your focus should center on preserving your trading bankroll even as you strive to make profits.

Ensure you keep your losses limited as you strive to gain trading experience while trading on metatrader4. Also, familiarize yourself with market trends before taking on a more demanding trading strategy for higher profits.

Control your CFD leverage – CFD trading

During CFD trading, the best trick to making the best trade decisions is not to overreact because of the changing trade graph.

When a trade is going according to plan, leverage can be a temptation. New traders often get tempted to increase the size of their position as a way of trying to make more from the trade.

To control your CFD leverage, never trade based on emotions. The more leverage you invest, the higher the amount you can lose should the trade incur losses. Therefore, always have your leverage in control no matter how promising the trade looks.

Start with a defined trading plan

To make the most profit and avoid losses, a CFD trader should have a clear cut trading plan. A good trading plan can minimize losses and enable you to remain calm when a trade gets volatile. The best plan options can be either a system-trading plan or a discretionary plan.

System trading plan – CFD trading – timely tips for beginners

A system-trading plan follows strict rules with no room for deviation, and the trader sets trading criteria to be met. Once the criteria are met, a trade is made. This is a recommended strategy for beginner traders since it is not influenced by psychological or emotional whims.

Once the criteria are set, the standards are maintained until a trade is made. While this strategy protects a trader from losing money, they have to adhere to the strict rules and guidelines without the flexibility to make trade changes.

Discretionary trading plan

On the other hand, a discretionary trading plan is a decision protocol used by traders for decision making, depending on the market information available at a given trade time.

As a discretionary trader, one can still follow a trading plan while ensuring discretion for each trade. The benefit of discretionary trading is that it allows a trader to adjust to current market conditions. However, it can also mean a lot of second-guessing, which can hurt a trade.

Choose A strategy and sticking to it

A trader cannot make money by only relying on their intuition. Even though some have gotten lucky while trading on instinct, the lack of a good strategy makes trading a gamble. When you have a plan, all your moves are deliberate and well calculated.

Generally, CFD markets are volatile. A good trading plan ensures that your investment is covered regardless of the direction the graphs move.

CFD trading – timely tips for beginners is a feature post

so, let's see, what we have: we decided to write this guide and tell you about all the trading tips and strategies you need to know about. At cfd trading strategies and tips