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How to Build a Trading Plan through Online CFD Trading

Online CFD Trading offers the potential for many different strategies. Anything from directional, to partially directional and even insured, hedged trading.

Online CFD Trading is Versatile and Dependable

Online CFD trading is very versatile because of its unique benefits. As it allows traders to profit from even tiny moves in the market, in almost all volatility conditions. Brokers facilitate high quality trading through their CFD trading platforms. And the kinds of traders that use CFDs range from careful, patient as well as impatient beginners to more advanced traders. Including even very sophisticated hedgers. The potential of CFDs together with the potential of a good but not necessarily very good strategy, leads to success. Traders only need to be right on direction about 50% of the time, or even less. And they can still trade for a living. Except that trades need to be larger, better focused and calculated. So that winning trades yield a 10% or 20% gain. And losing trades are identified early, and are either closed or hedged against. There is no need for ultra low risk-reward ratios, and such nonsense that many trading experts will have you believe. What is really needed in wise CFD trading is a realistic approach, going for the low hanging fruit. Which is that 10% or 20% profit per trade. And even these trades may require market exposure of more than a single day. Therefore the myth of overnight market risk should also be avoided.

How to Build a Solid, Safe Trading Strategy

New traders, as well as former losing traders need to focus whilst taking trading lightly. And they should refrain from having the urge to win there and then. An early good strategy can be based on trading from Tuesday through to Friday. By not trading on Mondays, it helps traders stand on the sidelines while the accumulated market volatility plays out on Monday. Following the two days of weekend. Where there may be a divergence between market price and the price that market participants want to see. Traders should pay attention to active market trading hours. It makes no difference what market they choose to trade. They should aim to hold trades overnight, and for at least some decent profit. Confusion and volatility are to be expected, so a kind of plan B trading idea must be on standby. So that unidentified losing trades can be temporarily hedged, until excessive uncertainty goes away. This requires maintaining sufficient funds in the CFD trading account. And also avoiding the desire for putting too much money in a single trade. Typically, the market tends to go where you might expect it to go. But only after moving against you for few days and by a good price margin. And this is where another classic tip is called into question. That of never adding to a losing trade. As with all things, the financial markets are not black and white, so black and white trading tips are not useful. In many cases you actually have to add to a losing trade. Moreover, online CFD analysis on the market in question, can help hedge the losing trade very well, and lock the open loss.

How to Identify a Losing Trade and Deal with it Early

Online CFD trading can be enhanced much further if one uses notional stops in the time domain. Probability dictates that if it takes too long for a trade to become profitable, then likely, it never will. And should be closed even if the trade is at break-even or at partial profit when the notional time stop has elapsed. The trick is defining the exact time period past which a trade should be seen as a loser. And this can be inferred from studying past daily charts and volatility. In the case of week to week trading. A trade may be a deceptive loser for many hours to few days, and then turn around. But most markets actually do have time limits of around 3 to 5 trading days. So a losing trade which is one day old should be temporarily hedged against or checked again more thoroughly. Whereas a losing trade older than the perceived time limit, say 5 days, should be either closed or maybe hedged for much longer. The exact action required depends on what the daily chart suggests about market direction. And in most cases carefully selected notional stops in the time domain do help in closing losing trades very early. Then there are trades which harder to identify, but a closed losing trade can always be opened again, at a much better market price. Online CFD trading can be dramatically more profitable through these methods for dealing with risk.

How to Make Money in Online CFD Trading

Online CFD trading is not inherently less risky than other instruments. But it offers much better efficiency. If used with boldness and skill, it makes money!

Online CFD Trading Can Make Millions over Few Years!

Online CFD trading can indeed enable wise traders to make millions. Gradually over few years. This is because the efficiency is so good, that profitability is maximized. And not only on profitable trades. But CFDs make it possible to hedge losing trades, and minimize the losses. In ways that other instruments never really can. In the hands of a beginner trader, you will likely see no success with CFD trading. And you will definitely not see any profitability with any other instrument, such as futures, options or spread betting. This is because beginners make all kinds of mistakes. And even the best beginner traders tend to make money trading from Monday through to Thursday, only to lose it all on Friday. Markets are harsh, unforgiving, and offer no easy way to making millions, period! But wise traders have been through long and painful learning curves. They are able to predict around 30% of market direction. And so they are able to make money consistently. Their profitability is much higher when trading through CFDs. At least 50% higher, in the majority of cases. And in some cases as much as 80% higher! This is because most markets moves are small in magnitude and futures, options and spread betting all fail to fully capture the move. CFDs capture every penny from start to finish, because they have the most linear pricing. Online CFD brokers make this possible through the infrastructure and the way they operate.

Predicting the Markets for Online CFD Trading

Profitable online CFD trading requires having a relaxed mindset. And also being a specialist. Commodities, as well as commodity related stocks and currencies are the best markets for beginners. Commodities are easier to predict because there is only as much supply as the producers can put out. You cannot print more of any given commodity to meet rising demand. You cannot replace one commodity with another. Whereas with many currencies and stocks this can happen. Commodity prices are determined by supply and demand. And if supply is known, which in most cases it is. Only demand is left to assess. In the case of crude oil and gold, rising long term demand helps increase supply. Because rising prices make it economically viable to extract crude oil and gold, from hard to reach reserves. This fundamental force of demand, is always present. And the week to week trend in the market will sooner or later align with the direction of demand. Beyond all this, a new trader has to become a commodity specialist, and dig deeper into the inner workings of a commodity market. And this is the easiest possible way to making serious money. Every online CFD course deals with some market, which is more or less impacted by some commodity.

Go for Trades Lasting Few Days or More But Pay Attention to Market Makers’ Actions

Traders seeking to make money in online commodity trading through CFDs, should focus on day to day trading. And not exclusively on day trading. But there is nothing stopping the trader from combining commodity stocks, and level 2 stock trading. By choosing commodity related stocks, and then seeking clues for breakouts. In the level 2 quotes, many false price movements and fake trends can be avoided. Usually, the commodity in question will move first, and the impacted stock will move somewhat later. If the stock however is very strongly correlated to the commodity price. Then the two markets will be moving at the same time. The commodity market always carries more weight. And will provide clues as to where the related stock is likely to go next. Level 2 information can help reveal the actions of the market makers, and their true intentions. CFD traders trade these stock price movements very efficiently, and when the underlying trend becomes clear. Every counter trend move on the stock, is a golden opportunity! This is how it is possible to make consistent profits, week after week. The task of working with level 2 data is a little bit difficult, but is also much more interesting than the typical, weak and often ambiguous classic price charts.

What is My Income Earning Potential in Online CFD Trading

Online CFD trading comes with risks, and obstacles. Which wise traders see as opportunities. In fact, no obstacle in life is ever seen as a totally bad thing.

Online CFD Trading Reflects Life Itself

Online CFD trading through the volatility of the financial markets, reflects life itself. Which is full of obstacles and challenges, as well as huge disappointments from time to time. The truth is humans are made to face and solve problems. The biggest problem we can have is having no problems at all. With every problem comes a challenge, and this keeps us motivated. Financial trading is difficult and tricky, but those determined enough to tackle its problems. They do make it through successfully. The good news is that no one can fully assess the true skills of any single person. Because humans have very strong imagination and problem-solving skills. And that’s why limits are exceeded. When it comes to CFD trading, it is also impossible to estimate the amount of success a trader can achieve. Some traders achieve consistent profitability in less than 5 years of active trading. And they are a minority, since most successful traders go through decade-long learning curves.

How Much Can I really Earn from Online CFD Trading?

Earnings from profitable online CFD trading depend on account size, trade size, and many other factors. But it is realistically possible to fund a CFD account with $5,000, and to make the equivalent of a basic salary, of around $500 to $600 per month. Which in some countries is enough to live on, in other countries is nowhere near enough. This is a conservative estimate, based on a strategy which is relaxed, and imposes little stress on the trader. But basically it safe to assume that a good trading strategy can make 10% per month, without taking silly and excessive risks. Traders living in high cost cities will have to scale up their trade size, and account size, in proportion. Traders who are wise and confident enough to scale up, do use $30,000 or more, in their CFD accounts. Traders on the other hand, who are not as confident in the markets. Or traders who don’t know how to trade CFD contracts to the best of their potential. May have to trade slower, and expect smaller monthly gains, perhaps 5% or 7%.

Leverage and Account Size Matter!

Leverage in CFD trading is provided up to high levels. But wise traders never really use more than 100:1. That is the best leverage level. Any online CFD course which recommends using either lower or higher leverage may fail to address key risks. Risks such as account survivability and maintaining sufficient margins so as to implement hedging trades. And hedging losing trades, at least temporarily, is a very smart concept to look into. In any case, traders need to trade at small size relative to their account size, use leverage of around 100:1. And to also use large stop losses, definitely larger than many market gurus would suggest. By taking these requirements into account, traders can trade safer and better. Because most traders blow their accounts because of over-leverage and small account size. Many traders actually have partially winning strategies, but the timing of the trades is often off. And because either the account is too small, or the leverage used is too much. The account is stressed to the limit, and they are unable to sustain their losing trades for just few more days. Then the market turns around and moves in the direction that they had originally anticipated!

How the Elections Could Affect the Markets and Online Forex Trading

The November US presidential election is likely to impact online forex trading through the impact on the US dollar. Traders need to ignore any market weakness.

Online Forex Trading Around Election Time

There is a possibility for markets to react with increased volatility on the days leading up to the actual election time. The November 8 election will determine the next US president, and volatility will go away the next day, no matter who wins. In the case of extended weakness in the US dollar, traders need to be careful. And to treat it with suspicion. Because any such weakness is very likely to lead to a surprise rally soon after the election. In any case however, volatility risk is a possibility, as all US crosses will be impacted. No matter how the US dollar reacts to pre-election uncertainty, it will later resume its major trend. Technically, the US dollar is already in a down trend of some sort. But the validity of the entire sell signal is already in doubt, because of the timing. Some confusion is likely to come about due to the election. And this means potential false technical signals in many US crosses. Other than that, the election will not have a major impact on online forex trading, in any way.

Trading the US Election

Forex traders should look for possible false breakouts and signals. And consider the US dollar to be in a likely bear-trap. Where many bearish traders will get trapped into a US dollar which will at some point skyrocket for no apparent reason. Even when day trading Forex live, traders should always keep the US dollar’s peculiar strength in mind. It is even likely, in the case of Trump becoming the next president. That the US dollar will surprise even more. Through some deceptive decline and some nonsensical rally. So it makes sense to be alert, and suspicious of US dollar weakness. And generally not to take short trades on the US dollar if it does continue to go down before and around the election time. The reason is purely geopolitical. With Trump as president, the US will be seen as stronger diplomatically, and the US dollar as more attractive. If you go on analyzing these events and learn Forex trading through the mindset of carry-trade forex investors, and foreign investors. You will see that many false technical and fundamental signals on currencies are caused by geopolitics. This is why the current weakness in the US dollar appears to be so deceptive.

Online Forex Trading Past the Election

Online forex trading is expected to benefit in the US, if Trump wins the election. And this expectation has to do with the natural evolution of the financial markets. And with the fact that republican governments are more business friendly. And are likely to help the financial industry in the US evolve better. US based forex traders may be allowed more privileges in the future, if Trump is elected. Such as higher leverage accounts. And even possibly access to CFD trading accounts. These are some very real possibilities that could change the forex financial industry in the US for the better. Because too many regulatory restrictions are not good for anyone.

How to Choose Your CFD Broker for Online CFD Trading

Generally, all online CFD trading is superior to non-CFD trading. The reason isn’t so obvious, but CFD brokers inherently best suit the needs of retail traders.

Online CFD Trading Means More Security

Unless you trade several $1000s per pip /market point etc, there is no reason to trade though direct market access. Retail traders tend to trade at less than $100 per pip /point, and CFDs are made for that. CFDs provide one way favorable market liquidity. Extra liquidity at critical market times, and all the liquidity that the small retail trader will ever need. This means security in trading, enhanced trading conditions, and best filling price. There are many good CFD brokers to choose from, but even average rated CFD brokers are still superior to non CFD ones. Moreover, the professional traders who trade through these CFD brokers are very demanding, and want the best of the best. And while welcome bonuses and incentives are welcome. It is actual trading in demanding conditions, where traders judge and rate brokers. Any CFD trading report written by serious traders is bound to be impartial, realistic, and provide specific details. These traders are very street-wise and rate all brokers very fairly. They have also been through the trading practices of older generation non CFD brokers, where issues such as frequent slippage and requotes were common. So nothing can escape their scrutiny for too long. The fact that these traders chose CFDs as their favorite trading instruments speaks volume about CFD trading in the real world. Where trade size matters, and where live trading has to be as dependable as demo trading is. But there are natural limitations, CFDs will deliver all their beenfits for trading up to $100 per point / pip. Which is an unreachable limit for all retail traders. One is bound to have made 10s of millions of dollars before reaching this limit.

Online CFD Trading is the Natural Evolution of Retail Trading

Online CFD trading is facilitated through various good CFD brokers. And it was only a matter of time for that to happen. Now all traders are demanding, and the excellent performance of CFD brokers is forcing all other types of retail brokers to also improve. The problem is a non CFD broker is limited in what it can do. It can never have the level of liquidity, linear pricing and enhanced trading operation that CFD brokers have.

Choose a CFD Broker Based on Real Trader Ratings

You can safely choose your CFD broker based on ratings and feedback by real, demanding traders. The truth is out there. And this broker will also offer you a basic CFD guide for understanding the basics of CFD contracts, and help you brainstorm trading ideas. Just remember that the strength of CFDs is not in their leverage. Leverage is found in futures, options, spread betting, or any DMA broker offering margin accounts. Leverage is not big deal. The strength of CFDs is in that they can track market price very closely, enabling you to capture entire market moves, dollar for dollar. Futures, options and spread betting fail spectacularly to do that, because they have no linear pricing, And often, half the market move is missed. The result is getting a very bad filling price every time. But especially in tight range day trading, literally half the move is often missed. CFDs don’t have this problem. Then compared to DMA brokers, CFD brokers offer better liquidity still, and get around exchange-imposed restrictions. For example, when short selling restrictions are imposed, DMA brokers don’t allow you to short stocks, and yet at the same exact time, CFD brokers allow you to trade as normal and go short these stocks. When it comes to retail-size financial trading, there is no match for CFDs! Online CFD trading can get you above and beyond classic trading strategies.

Is the Economy the Biggest Factor in Online Forex Trading?

Various factors impact online forex trading, through obvious or complex mechanisms. The state of a country’s economy is a major factor in currency strength.

Online Forex Trading and the State of the Economy

Every national currency is impacted by the state of its country’s economy. The economy however works in complex ways, and the forex market may or may not have priced in anticipated impacts. Long before the actual events occur in the economy. Apart from this complexity, there is also geopolitics and the reputation of the country. All of these factors can impact a national currency in the medium to long term. In the short term, economic reports released to the market, simply create volatility. But no safe clues can be inferred about day to day market direction. The currency pair in question may rise or fall, depending on what traders’ perceptions are at the time. Online forex trading is impacted accordingly. And so it is not easy to make straightforward predictions. Based on simplistic and naive relationships between economic events. Rising inflation for example is a bad thing for an economy. But a rising inflation is bound to bring about rising interest rates later on. Which will attract carry-trade investors. And they will want to buy that national currency as a result. The question is where is the currency coming from, and where it is likely to go. Economic events, on their own, are not very useful. It is economic events, together with prior history and government policy, that are more useful. And even so, traders have to check the currency in question and its trading history as well. So as to determine if even valid, substantiated expectations have been already priced in by the market, or not.

Online Forex Trading Defies the Naive Approach to the Markets

Actual online forex trading always defies most traders’ expectations. Because these expectations are naive in nature. And they fail to address the serious long term issues concerning a particular country. During periods where the economy performs poorly. The government wants to stimulate the economy so as to be able to collect more taxes. If interest rates are set lower, economic activity will certainly rise. But the national currency may fall or may rise. It depends on the exact demand by global trade, and on the willingness of carry-trade investors to sell the currency. These two factors act in opposite ways, offsetting each other. If either one prevails, the market will reflect the reality. Finally, there is demand specific to commodity related currencies. Such as there is for USDCAD, which is inversely correlated to the price of crude oil. Because the Canadian dollar is directly, strongly and positively correlated to the price of crude oil. If crude oil price rises, the Canadian dollar will follow suit, regardless of the set interest rates. So basically, every country requires a unique approach, in assessing and predicting its currency. Generic analysis methods simply don’t work. And those who attempt to trade forex online on naive assumptions, end up losing their money. Only the patient, well prepared traders are successful.

Central Bank Interventions

Sometimes the central bank of a country may intervene to slow down the movement of the national currency. Central bank interventions cause large market fluctuations, lasting several days. And the market may move by 500-800 pips. These moves are very difficult to predict by the use of technical analysis. As all technical signals are defied by fundamentals. Only in-depth fundamental analysis on the economy may help predict these interventions. What makes them even more confusing is the fact that the trend does not actually change. An intervention only causes a slow-down effect on the existing trend. Through the short lived counter trend move. After which the market resumes its prior trend. You can’t learn forex trading effectively, without studying central bank interventions, big and small. As they are key in understanding the big picture on the relation between the economy and traders’ perceptions.