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Trading contracts for difference (CFD)

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This article is published in collaboration with Scutify, where you can find real-time markets and stock commentary from Robert Marcin, Cody Willard and others. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

Contracts for difference shortly known as CFD, is the difference between the trade where it entered and exited. CFD is a contract between the client and broker. This trading helps you to check on the rising and falling prices of the instruments like gold, shares and commodities. In CFD, trader never buys the assets but the number of units for a particular instrument depending on the assumptions whether the price rise or fall. CFD trading is helpful to traders to want to make better money, but it contains risks and may not be suitable to everyone. Trading with CFD always has a profit with the market even ups and downs. If you feel like the asset's price is going to rise, buy the position and if the price is falling, you can always sell it. Huge markets can be traded by cfd grid strategie.

Introduction to CFD: Key benefits of trading CFD:

There are many benefits trading CFD unlike other trading:

  • CFD's are open for only few days or weeks where short term opportunities can be created.

  • Trading here is active or passive that is trade when you want to.

  • Provides higher leverage than any other trading. Such that losses can be minimized.

  • CFD's includes major markets and can be easily traded in any market which offers a single platform.

  • Closing and opening of positions depend upon the trader as the trading is 24 hours.

  • Due to the automated tools, the actions like opening or closing of positions are fast and instant.

  • It has low commission rate compared to other trading.

  • Variety of trading options like stock, index, currency and commodities are involved which makes the traders more profitable.

  • Easy and simple to operate and understand through the available resources.

  • They are tax efficient and traders are not required to pay UK Stamp duty.

Although, it includes benefits, there are disadvantages trading CFD.CFD is not highly regulated and allows to lose money at times. It only works with the best plan.

CFD Vs Forex Trading:

Similarities between CFD and Forex:

Traders can easily enter or exit the markets when they fall or rise with cfd grid strategie. Both the trades are run electronically without involvement of the physical money. All the fees and commissions are same for the trading. Both the trading involves similar execution process.

Difference between CFD and Forex:

Forex trading completely involves pure currency, whereas CFD trading involves instruments like gold, commodities, shares indices, energy or metals.CFD trading is supply or demand in the trends where as Forex depends on the global markets.

CFD Trading Strategies:

CFD is same as other tradings, but only small amounts of money are needed. Some CFD strategies:

Going Long CFDs: Here the goal is to buy low and sell high. This is the basic strategy to be followed. If you lose, your position goes lower.

Going Short CFDs: The goal in this strategy is to sell high and buy back at less price. The traders who sell short selling CFDs will be benefited.

Short term CFDs: Identify short to medium term trends. It may prolong from days to months.

Swing Trading CFDs: Try to take advantage of small fluctuations in the market and use profit targets. It lasts for a day to 20days.

Intraday trading CFDs: Identify the stocks with the daily range and take advantage of the one day trading before the market closes. Here the risk involvement is more.

Position trading CFDs: Based on intraday trading information, position yourself from days to weeks.

Zone Trading CFDs: Traders may attempt to buy on support and sell on near resistance levels.

Pairs Trading CFDs: Expert traders can track two stocks simultaneously. They can create formulae to track the correlation between the two points.

News Trading CFDs: According to the news and websites about trading, one can perform the trading. This may vary from minutes to days.

Dividend Stripping: Buy the stock before it goes to ex-dividend and sell the stock before ex-dividend date.

Hedging CFDs: This helps to reduce the volatility in fluctuating markets. Traders can protect the current shares by buying the opposite shares.

With these CFD strategies, positions can be held in a profitable manner. You will get paid interests every day.

Tips to trade CFD:

  • Trader should preserve the capital by using the best trading system. Losses should be minimized. Try not to lose money even if you are not going to gain.

  • Have a money management plan by a positive expectancy in the edge of markets.

  • Try to win the positions and get more profits. Be patient and wait for the opportunities.

  • Control the CFD leverage, by investing small and gaining more. Keep your positions high.

  • Identify the stops outside of live trading and price moving.

  • Have a clear and realistic goal while trading CFDs.Stick to your investment.

  • Use a CFD trading journal which keeps all your trade records well and helps in the future.

  • Keep the trading tools ready while trading and have a money management strategy as well as the entry strategy.

  • Study how to apply various techniques and execute best in the trading by gaining profits.

  • Have faith in the trading and always try to be positive.

Grid Strategies are alternates to the traders who do not have opinion on market direction. Grid strategies are used in averaging. They are associated with Forex and CFD trading. Instead of placing one trade, multiple trades are placed to form a grid pattern. The grid software is easy to code and simple to use. The grid strategy has no direction with the market trends, which is often confusing. Positioning and money management are the problems associated with grid. Grids only work at the moment it is applied and flows away with time. Grid strategy may not be good to the right trading, but helps out the traders in directional ways. There are many grid set ups to manage the risks involved in the trading.

Start the trading with proper strategic plan. Happy Trading.


This article was written by Adam Monson for on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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