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5 Best CFD Trading Tips for 2018

Posted In Business - By Techtiplib on Saturday, February 24th, 2018 With No Comments »

A contract for difference (CFD) bears striking similarities to the strategies employed during share trading, the primary difference being the small investment amount you need to pay upfront for controlling your entire position. You can read more about what is CFD trading. Thus, your CFD trading methods are bound to have plenty in common with share trading. But make no mistake, there are no get-rich-quick techniques in CFD trading. You don’t become a better trader overnight, and start spewing new ideas. No, for that you need the right strategies you can apply to the financial markets. Find out what they are below:

Trading Tips

  1. Going Long CFDs

Interested in buying low and selling high? Then this is the perfect strategy for you. Find shares with a solid uptrend and trade as per this trend. In case the share gets sold down in the middle of the uptrend, set the limit order $6.00. Now you have a stop loss of 2 ATR. Trail a stop right behind your previous position. Your aim should be to ride the share as long as it moves in your favor. Remember, the smaller the trailing stop, the smaller the period of time. When trading a trending stock, run a bigger ATR trailing stop like 2 or even 3 ATR. However, make sure you test out all of the strategies before you employ them.

How Long?

The best part about going long CFD strategies is how they suit every timeframe. The trade length depends on how viable this trend is as well as the trailing stop distance.

Target Audience

Well, going long CFD is a basic CFD trading technique. So, anyone who wants to buy low and sell high should benefit from this.

Risks

Get out at the right time. If your long position falls below the entry price and encounters your stop loss, you lose.

  1. Going Short CFDs

Selling high and buying back at a reduced price is what going short CFD strategy is all about. Pick a company whose shares are being sold down heavily by the investors. Before, the company had a higher value but soon fell out of favor with the investors. When the downtrend becomes evident, bide your time for overbought conditions and then open a short position by selling a few thousand shares of that company.

After that, it’s all about trailing a stop loss till you find an exit. Short selling CFDs and then buying back at a reduced price allows you to earn a good profit in-between.

How Long?

The best part about the going short CFD strategy is how it fits every timeframe. The trade length is decided on the basis of how strong this trend is along with the trailing stop distance.

Target Audience

This method works for traders who know how short-selling CFDs work.

Risks

Remember to opt out once your long position exceeds the entry price, hitting the stop loss in the process.

  1. Trading CFDs in the Short Term

Check out the contract for difference market. You’re sure to find plenty of short-term movements which are ripe for the taking. When we say short-term, we mean from a few days to a couple of months. Every timeframe is covered by this strategy. As far as trading CFDs is concerned, a CFD broker is going to charge one overnight financing rate. This is the main reason why trading CFDs is considered a trading technique for the short-term.

You need to figure out which are the short and medium term trends. Then check out the strength of a particular trend by using the moving average. If you want to locate trends that last longer, you should use a moving average that is more than 50.

How Long?

Short term trading CFDs can last anywhere from a few days to several months, depending on the circumstances.

Target Audience

Every trader stands to benefit from this type of strategy.

  1. Swing Trading CFDs

The key to excelling in CFD trading with this method is to notice the minor fluctuations throughout the whole market. As soon as an uptrend is confirmed, invest in the dips. Utilize profit targets for this purpose or pick trailing stop losses.

Start by selecting a company with a steady uptrend. Now, this company may come off its uptrend, and then start tracking back to highs after hitting a kind of turning point. When you’re employing swing trading CFDs, your goal should be to find out this turning point. As soon as you receive confirmation of an uptrend, try a long position so that you’re able to move higher.

You swing trade CFDs when you’re searching for a trade based on the current trends in the market and you encounter a pullback. That’s why swing traders often inquire about the direction before they enter. Thus, rather than enter at the low, you bide your time to break the short-term high. Once that’s done, the trade must be placed, the trailing stop loss must be run, and exited as indicated by your stop.

                  How Long?

                  Swing trading CFD strategies can run from a minimum of one to a maximum of 20 days.

                  Target Audience

This method is ideal for every short term or medium term trader who knows his/her stop losses as well as stop to enter orders.

Risks

Unless you get out before the long position falls past the entry cost and hits the stop loss, you lose.

  1. Intra-Day Trading CFDs

Intraday trading basically means within a day. Traders use this technique to close a position before the closing of the market. The trick lies in identifying which stocks have a solid daily range, also known as ATR. A stock might head lower on open but may rise to the opening price later. There are traders who prefer to go long when the stock breaks through the opening price. Be sure to ride this trend on the basis of intraday pricing until you hit a profit target or encounter a stop loss.

How Long?

Using this technique, you’re able to open and close the position on the same trading day. Since you want to close the position prior to the close of the trading session, fast-moving stocks are your best bet. If the stock doesn’t move, your profits are reduced considerably.

Target Audience

Veteran traders who are familiar with position sizing methods and are confident in front of the computer.

Risks

This method carries high risks as traders try to use bigger position sizes to gain benefits from smaller moves. If your trade doesn’t move too much or you use too much leverage, you must deal with loss.

CFD trading techniques are always changing, and you need to stay abreast of the latest goings-on in the market to stay ahead of the curve. Otherwise, you might not secure the kind of profits you want in 2018.

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