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Benefits of using CFDs for trading

Here, you are betting that the price of an asset will move up or down, and if it does, you’ll get a profit. Companies often seek to invest their funds in alternative assets such as hedge funds and private equity, which involve substantial risks. Here is where CFDs can help.

CFDs are referred to as contracts for difference to imply the difference amount between the opening and closing prices of the underlying asset.

What is Contract for Difference (CFD) Trading

A Contract for Difference (CFD) is a type of derivative contract used to take a position on the price of an underlying asset without committing to its ownership. CFDs allow you to trade on the price of an asset without owning.

How do CFDs work?

CFDs allow traders to magnify their profit potential by trading on the difference between the underlying asset’s price at any given point. The difference between CFDs and Options is that there is no obligation to buy or sell the underlying asset with CFDs. With Options, however, you must buy or sell the underlying asset.

CFDs allow traders to buy or sell the underlying asset below or above their current price. Traders can also sell CFDs short, meaning they can borrow an asset from a broker and sell it at a higher price.

How to Trade CFDs

CFDs (contracts for difference) are a popular trading product for financial institutions, brokers, and individual investors.

  • CFDs don’t require buying physical assets, which makes them an excellent choice for investors concerned about the safety of their investment.
  • CFDs allow investors to trade on margin; thus, you don’t necessarily need to stump up the total value of an asset. You can borrow, so you don’t need to invest in the total amount of an asset, provided you have the capital available.
  • CFDs give you exposure to a wide variety of assets, from stocks and shares to commodities, foreign exchange, and indices.
  • CFDs spread risk by allowing investors to trade in favorable and unfavorable market conditions. If the price of an asset is falling, you can take out a CFD that will gain if the asset rises.
  • CFDs are traded on margin. You only need to put down a certain amount and borrow the rest.
  • CFDs let you decide the level of risk you want to take. You can trade on margin with leverage and borrow the remainder.

What are the Benefits of trading CFDs?

  • CFDs are a leveraged product that enables you to trade a percentage of a share, index, commodity, or currency rather than the entire value.
  • CFDs can be an excellent way to explore alternatives.
  • CFDs can replicate the returns of index trackers, exchange-traded funds, investment trusts, and mutual funds.
  • CFDs can also help you diversify your portfolio. You can also trade CFDs on currencies, such as the euro or pound.
  • CFDs can also provide you with exposure to commodities, such as oil or gold.
  • CFDs can help hedge against volatility in your portfolio. For example, if the price of gold falls, you could enter a long position on GLD, which would give you exposure to gold. However, you would only own a fraction of the price of gold, so you would effectively be hedging your loss.
  • CFDs can help you take advantage of short-term price movements. For example, if the price of oil soars, you may be able to buy oil CFDs on the market at a lower price.
  • CFDs allow you to gain exposure to stocks, commodities, and indices without committing to the underlying assets. In addition, CFDs serve to magnify your exposure to specific markets or sectors.
  • CFDs provide access to global markets.
  • You can use CFDs for hedging and speculation.

Conclusion

More people are trading in shares, commodities, currencies, and indices than ever before. The benefits of trading CFDs include minimized costs, accessibility, and ease of use. Plus, it is possible to trade assets if you’re located in a foreign country.

CFDS is a relatively new form of investment product. They are designed to allow traders to speculate on the future performance of a wide range of assets, from stocks and shares to currencies, commodities, and bonds.

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9 Essential Tips On Forex CFD Trading (Contract for Differences)

Many investors worldwide prefer trading forex to stock due to several reasons. Some of the most obvious reasons for its popularity are that besides opening 24 hours a day, forex exchange is the biggest global market in terms of the day-to-day trading volume. It is also highly liquid and easily accessible.

CFD (Contract for Differences) has become popular in forex trading and other trading equities in recent years because they are less capital intensive. They are helpful tools that use a user-friendly method to assist you in achieving your trading goals. However, this does not mean that forex CFDs trading does not have risks.

If you want to survive in the cutthroat forex CFDs trading business, you need to understand what it entails to trade CFDs and the essential tips to help you succeed. The following basic tips will help you make the best out of your trading by avoiding the usual CFD trading pitfalls.

1.   Select a reliable, trustworthy CFD broker

If you are new to forex CFDs trading and do not know how to go about it, start by choosing a reliable CFD broker for your trading outcomes. Trading frequently can eat at your profits because you will need to pay the spread cost and the bid and request price difference. Choosing a broker who knows the extent to which your trading results will not significantly affect your profits is a security measure.

2.   Develop a trading plan

Before you open a forex CFDs trading account, make sure you have a trading plan in place. Some of the things to include in your trading plan are your objectives, how large a profit you would be comfortable with, how much loss you can tolerate, and plan when to close your trade in the worst-case scenarios of your investment performance.

3.   Use a Demo account

Do not venture into forex CFDs trading until you are sure you can hack it. The best way to be sure is to start your trading with a demo account that many trading platforms provide. It is a great place to start before risking real money to trade. Tradewith an amount of money you are willing to begin with in an actual setup to see the performance and realistic gains.

4.   Use orders for stop-loss

The foreign exchange market is volatile and unpredictable. Using a stop-order loss protects you against making extreme losses in your forex CFD trading. It is also one of your key risk management factors. Your broker can help you to calculate when to make a stop order and take profit.

5.   Leverage

It is okay to use leverage, but you must know it can work for or against you. Investing more than you have by leveraging is good, but you have to be extremely cautious. Leverage can amplify your profits and your losses too.

If you are not ready to lose what you have in your trading account, be careful of what you choose as your leverage ratio. Ensure that your choice complements the proper amount of your trade position.

6.   Carry out enough research

If you want your chances of successful trading, you should not start trading forex CFDs blindly. People might also give you conflicting information about CFD trading foundations, but becoming your own specialist in everything you need to know will not hurt. Gather all the information you need by reading widely, watching trading videos, and even asking questions.

7.   Cut your losses

Cutting losses when things do not go your way is not easy, but if you want to survive in the industry, it is something you need to do. If you have an original trading strategy, stick to it even when you start to lose. If you bring in your emotions, you will pursue your losses to get back what you lost. Cut your losses and try another day.

8.   Be ready for the rainy days

During some trading days, everything that you wanted to go right might go wrong. Therefore, you should be ready for such days by setting aside some cash, which will come in handy if you need further margin.

9.   Diversify

Do not risk everything on one endeavor. If you think forex CFD trading is not doing it for you, diversify and try something else. It is important to note that forex CFDs trading can easily lead to erratic gains or losses so do not make it your single source of income.

Wrapping up

Forex CFD trading can increase your chances of making profits if you trend carefully. You can also lose significant investment if you do not pay enough attention to trading pitfalls. It does not have to be different from other trading other market mediums if you maintain discipline, stay focused, avoid greed, and follow your trading plan. The above tips will help you to achieve your trading objectives.

 

Many investors worldwide prefer trading forex to stock due to several reasons. Some of the most obvious reasons for its popularity are that besides opening 24 hours a day, forex exchange is the biggest global market in terms of the day-to-day trading volume. It is also highly liquid and easily accessible.

CFD (Contract for Differences) has become popular in forex trading and other trading equities in recent years because they are less capital intensive. They are helpful tools that use a user-friendly method to assist you in achieving your trading goals. However, this does not mean that forex CFDs trading does not have risks.

If you want to survive in the cutthroat forex CFDs trading business, you need to understand what it entails to trade CFDs and the essential tips to help you succeed. The following basic tips will help you make the best out of your trading by avoiding the usual CFD trading pitfalls.

1.   Select a reliable, trustworthy CFD broker

If you are new to forex CFDs trading and do not know how to go about it, start by choosing a reliable CFD broker for your trading outcomes. Trading frequently can eat at your profits because you will need to pay the spread cost and the bid and request price difference. Choosing a broker who knows the extent to which your trading results will not significantly affect your profits is a security measure.

2.   Develop a trading plan

Before you open a forex CFDs trading account, make sure you have a trading plan in place. Some of the things to include in your trading plan are your objectives, how large a profit you would be comfortable with, how much loss you can tolerate, and plan when to close your trade in the worst-case scenarios of your investment performance.

3.   Use a Demo account

Do not venture into forex CFDs trading until you are sure you can hack it. The best way to be sure is to start your trading with a demo account that many trading platforms provide. It is a great place to start before risking real money to trade. Tradewith an amount of money you are willing to begin with in an actual setup to see the performance and realistic gains.

4.   Use orders for stop-loss

The foreign exchange market is volatile and unpredictable. Using a stop-order loss protects you against making extreme losses in your forex CFD trading. It is also one of your key risk management factors. Your broker can help you to calculate when to make a stop order and take profit.

5.   Leverage

It is okay to use leverage, but you must know it can work for or against you. Investing more than you have by leveraging is good, but you have to be extremely cautious. Leverage can amplify your profits and your losses too.

If you are not ready to lose what you have in your trading account, be careful of what you choose as your leverage ratio. Ensure that your choice complements the proper amount of your trade position.

6.   Carry out enough research

If you want your chances of successful trading, you should not start trading forex CFDs blindly. People might also give you conflicting information about CFD trading foundations, but becoming your own specialist in everything you need to know will not hurt. Gather all the information you need by reading widely, watching trading videos, and even asking questions.

7.   Cut your losses

Cutting losses when things do not go your way is not easy, but if you want to survive in the industry, it is something you need to do. If you have an original trading strategy, stick to it even when you start to lose. If you bring in your emotions, you will pursue your losses to get back what you lost. Cut your losses and try another day.

8.   Be ready for the rainy days

During some trading days, everything that you wanted to go right might go wrong. Therefore, you should be ready for such days by setting aside some cash, which will come in handy if you need further margin.

9.   Diversify

Do not risk everything on one endeavor. If you think forex CFD trading is not doing it for you, diversify and try something else. It is important to note that forex CFDs trading can easily lead to erratic gains or losses so do not make it your single source of income.

Wrapping up

Forex CFD trading can increase your chances of making profits if you trend carefully. You can also lose significant investment if you do not pay enough attention to trading pitfalls. It does not have to be different from other trading other market mediums if you maintain discipline, stay focused, avoid greed, and follow your trading plan. The above tips will help you to achieve your trading objectives.

 

 

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The Forex Trading Swing Strategy

Ever wondered how people find the right Forex strategy? You can be sure that it is not easy considering the fact that there are thousands of them to try out. Worse still, there are technical indicators that also need to be considered when choosing a trading strategy.

The good news is, it does not have to be that complicated and challenging. You can start by creating a checklist of the trading strategies you will use. When making a list, make sure that you include a swing trading forex trading strategy.

What is Swing Trading?

Forex swing trading is a trader’s attempt to benefit from the market swings. Forex market swings have two parts: the swing point and body.

As a forex trader, it is your duty to time entries such that the majority of a swing body will be caught. Even though catching swing points is very lucrative, it is not too necessary. As a matter of fact, an attempt to catch extreme swing bottoms and tops might cause you increased losses. In such a case, the best way to do it is by being patient and wait for the price auction sell or buy signal.

Difference between Swing and Day Trading

As we’ve established, the idea is swing trading by catching bigger market swings. Naturally, this will sometimes mean having holding periods of even several days or weeks. Day trading typically uses shorter holding durations and can sometimes even be a few seconds worth. While there are other trading styles available, the day and swing styles are the two most popular.

How to know if Swing Trading is suitable for you 

You will know swing trading is suitable for you if:

·         You are okay with holding your trades for some time, even days or weeks:

Many swing trades last for up to several weeks. This means you might have to hold positions even over some weekends. Long holding periods also come with risks. The good news is that there are ways of managing such risks. One such way is closing the position before a weekend, especially if there is a likelihood of volatility, e.g. government elections.

·         You’re looking for more free time:

Swing trading gives you more free time. You May end up spending about 40 minutes reviewing charts daily. This, in turn, keeps you safe from overtrading.

·         You are okay with taking fewer trades while earning more on each trade:

Swing trading works best when there are higher time frames. As such, there are limited opportunities. That is why you may end up having even five setups a month. Even so, each trade’s return might be more significant as compared to that of day traders.

·         You want a slow-paced trading style:

Sometimes, slow is not such a bad thing in forex trading. A slow-paced trading style like the swing style means having more time to make correct decisions. The result is less anxiety and stress.

·         You have full-time school or job:

If you are not ready to be a stay-at-home trader, swing trading is the right style for you. It gives you the flexibility to work around your schedule.

How to know swing trading isn’t suitable for you:

As is with everything else, the swing trading style is not for everyone. Here are some of the signs that you shouldn’t use this trading style:

  1. You want to know if you make the wrong or right move immediately:

Long term trade requires patience. If you want immediate results, the swing trading style is not for you.

  1. You have anxiety whenever a trade doesn’t go your way:

In most instances, markets go a completely different way from the one you anticipated. All traders have to deal with a drawdown. If you get anxious each time you experience a drawdown, the swing style isn’t for you.

Conclusion

The swing trading style gives you a less stressful trading environment as you produce great returns. That is why it is good to have something else to do other than trading when using this style. The most significant factor in using this style is getting accurate levels. If your chart’s resistance and support levels aren’t reliable, you will be trading with low confidence. As such, check daily time frames for reliable signals.

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The ABCs of Trading Contract for Differences (CFDs)

If you are interested in starting to trade CFDs, you need to take time to come up with the best strategy for your trading style. The best way to find the best strategy is to learn of the best strategies for CFD trading. Trading strategies are market approach plans that ensure you only invest where you are likely to make profitable returns. These strategies also work to ensure you become a better trader and that you make more profit than you do losses.

The CFD trading strategy you settle for has to fit your attitude you have towards the markets you want to trade. The best strategy for your trade should also be one that suits your preferred trading time, technical knowledge and risk appetite.

In this article, you will find the most ideal CFD trading strategies you can use to trade in demo and live accounts on any platform.

Day trading strategy

The main principle of the day trading strategy indicates that traders should never leave any of their trading positions open after the closure of the forex market. This way, they can avoid the added cost and risk associated with holding a trading position overnight.

As a day trader, your main agenda should be generating quick profits from even the smallest price movements before close of business. Since it demands taking advantage of small market movements, day trading is only ideal for full time traders who can keep watch on the market chart all day.

Preserve Precious Capital (PPC) strategy

PPC is a capital preservation and money management CFD trading strategy for all traders and is the most important strategy to learn as a trader.

A common mistake traders make is getting too fixated on making money that they forget to preserve what they have invested.

In a PPC strategy, a trader learn skills they can use to protect the money they have invested in CFD markets. This is achieved by knowing which open CFD positons are more likely to make losses and trying not to investing in them. Instead, traders should focus on putting their money in CFDs with the likelihood of making profits. Learning how to pick the best CFDs is the ultimate way to preserve precious capital.

 Swing trading strategy

Swing trading heavily emphasizes on technical analysis of the CFD market. It requires a trader to find price patterns that offer the best short-term positions for trading.  As a swing trader, your whole trading agenda is focused on the price of the CFDs you are interested in trading. Generally, swing traders are less focused on the value of the asset when looking for the best assets to trade.

As a swing trader, you can hold different trading positions for several days. Typically, most swing traders hold position for longer than day traders do, but shorter compared to position trader.  As a swing trader, you are also at liberty to make trades against a trend if it presents a good opportunity based on your system analysis.

Position trading

This CFD trading strategy allows traders to hold specific CFD assets over the longest trading period, usually a few weeks or longer.

As a position trader, you can expect to make fewer CFD trades compared to day traders. In addition, every trade you make delivers a bigger potential for profits. However, your ability to enjoy these huge profits is dependent on your market timing. You need to know when to sell open CFD positions. Holding them for too long increases the possibility of significant losses just as they do for profits.

Scalping

This is a strategy used by a very short terms CFD trader, often refers to as a scalper. This involves trading CFDs just a few minutes before their positons close. A scalper’s strategy is all about trying to beat a bid-offer spread and skin for a profit that only spread over a few points before positon closing. To perfect your scalping strategy, you need to be good at reading tick charts.

Choosing the best strategy for your needs

If you are having a hard time deciding on the best CFD trading strategy to follow, you can employ the use of technical indicators. These make it easier for traders to come up with best strategies for their CFD trading needs. You can also employ different strategies on demo account to determine the best one for your trading needs.

 

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Essential Tips on Choosing the Right Forex Broker

You might have at one point in time considered forex trading, but the complexities surrounding the trade might have put you off. At first, you might be scared stiff by complex terminologies like currency quotes, lots, technical indicators, economic data, zones, pips, Forex charts, and more.

Forex trading is a learning experience that requires patience and lots of learning to grasp the fundamentals of the markets. Forex markets are markets where currencies are bought and sold depending on the value of the other currency.

It is necessary to evaluate yourself before entering into forex trade by analyzing whether you have the drive, courage, and focus of the trading activity. Additionally, be ready for the lies and tricks of fraudsters who abound in this trade.

With that background information, the first step is to open an online account with a broker. There are hundreds of online brokers, each claiming to be the best in the market, and this is where your first challenge comes to light. This article serves as a guide to choosing a suitable broker based on the following criteria:

Security

In this trade, you need guarantees that your money will be safe and sound and that the profits you will be earning are safe. Don’t be deceived by the appearance of the broker or scammer in that case. Even the presentation of a seemingly well-designed website doesn’t mean the owners are genuine.

What you need to look at is the broker’s track record, the registration documents, and certifications by relevant authorities.

Initial Deposit Requirement

Many a time, the broker would ask you for a deposit. While it is ordinarily safe for you to tread carefully and offer fewer amounts, it is not prudent as it amounts to undercapitalization. A genuine or serious broker would ask for adequate initial deposits bearing in mind that small amounts could be wiped out in case of fluctuations. The key here is to invest what you can afford.

Spreads

Spreads are what is payable to the broker regardless of the profits or loss. Therefore, choose the broker with competitive spreads.

Deposits and Withdrawals

Your savings and profits should be readily available for withdrawal at any time you want. Similarly, if you are not satisfied with the services of a broker, the broker must facilitate your closure with ease. For deposits, the broker should provide seamless services.

Margin Requirements and Leverage

When choosing a broker, go for the one with minimum leverage. A broker should gradually increase leverage as you gain experience in the markets. As a beginner, don’t go for a broker who will start your forex trade with maximum leverage. You are still learning the ropes, and you need to develop your skills as time goes by.

Trading Platform

Your choice of the trading platform should be tamper-proof so that no one tamper’s with trades. Go for easy to use platform to avoid issues when trading.

Customer Service

You are better off with helpful brokers who will handle your issues of system delays, deposits, and withdrawals. It is paramount that the customer service desk understands the techniques of trading. Read through website reviews of the brokers to establish if they are the right fit. If their reviews obtain complaints, bear in mind that their service is poor.

Account Types

There are several packages available. The best way to go about this is to choose one with customizable features and those with adjustable leverage and margins.

Currencies Offered

Choose a broker with a variety of tradable currencies on offer. In essence, the broker should offer a rich mix of currencies from the currencies of developing nations to the currencies of developed economies.

Forex Regulations

Forex regulating authorities depend on your country and locality. CFTC and NFA regulate commodity brokerage in the United States, The Australian Securities and Investment Commission (ASIC) regulates forex trading in Australia. The Swiss Federal Banking Commission (SFBC) is the regulatory body in Switzerland. Financial Services Authority (FSA) regulated Forex in the UK.

Your Take

Forex trade carries a high risk, and high degrees of leverage can work either way, and it is imperative to carefully consider your objectives before deciding to invest.

Whether to invest or not is your individual decision based on your risk appetite and leverage. On entry, you need the courage to overcome the emotional aspects of the forex trade.

There are many experiences that you encounter along the way before you become an established trader. There are lies and tricks of fraudsters to overcome in this business.