New traders interested in online CFD trading need to know how to make the best out of CFDs. CFD contracts are more about a liquidity edge, and not leverage.
Online CFD Trading for Superior Market Exposure
Many would have you believe that CFDs are all about high leverage and affordable access to the financial markets. But that’s not a very exciting reason to choose CFDs for. Leverage is also found in futures, spread betting and options. Online CFD trading does work best with leverage, especially leverage of 100:1. As all traders, more or less, need to increase the buying power of their money. The real advantage of CFDs however is with liquidity and linearity. These two benefits make CFD instruments far superior to any other trading instrument! Sometime the difference is so huge. That the profitability of online CFD Trading is more than twice that of other instruments. All other instruments offer affordable leverage also. But their pricing is horrible, and highly non-linear. Which means they are not following the market price closely enough. For you to make a profit out of small market movements. And 70% of the time, the market only offers small movements. So it is important for new traders to recognize the key benefits of CFDs and use those to gain an edge in their trades.
Hedging through Online CFD Trading
Traders of many markets, can also hedge many risky trades through CFDs. All because CFDs offer just the kind of superior linear pricing that a hedging trader needs. Any hedger who knows how to trade CFD contracts to temporarily lock in an open loss on another trade. Knows why this is so beneficial. Most of these trades are assessed by the trader, within few hours or days. Trades that are believed to be totally wrong, are closed. And trades that are believed, upon evidence, to turn around, are kept open. CFD based hedging enables the trader to save $100s if not $1,000s on all losing trades. Both temporary and permanent losers. This is where pricing linearity is really priceless. And the superiority of CFDs is best revealed. But CFDs are also more liquid. Traders are very likely to get the best filling price and without delays. Most of the time, and even in hard, volatile market conditions.
Choosing a CFD Broker and Guidance
Traders need to choose a CFD broker, one with a good reputation and feedback. New traders can safely do so by looking among brokers having satisfied clients and good ratings. CFDs and good CFD brokers can’t guarantee trading success. It’s common sense to expect to face confusion and ambiguity in the markets. Just remember that even the best traders out there face the same problem all the time. It is not possible not have any losing trades, or not to be wrong. But it is possible to trade profitably. And this is where a basic CFD guide comes in. A basic CFD guide, with a focus on one particular market, is really useful to have. New traders should think like specialists, and should focus more on one commodity. By starting trading this way, and studying one commodity well, trading will be more solid. As commodities are much less confusing than other markets. They are still difficult to predict, impossible to predict in all time frames. But it is possible to have predictability around 30% of the time that a commodity market trades. Which is more than enough to allow for profitable trades.