Page 176 – XTrade

All about CFD Trading Software and Tools

CFDs are unique in many ways, and wise traders use them to lower the risk in all kinds of trades and investments. Even the world’s best, most sophisticated stock Option traders use CFDs in the most directional part of their trades. Because it makes calculations easier, and cost is also less as opposed to an all Options based trade. These wise traders do use CFD trading software, which is nothing more than a spreadsheet calculator, or something just as powerful. There is no need for any other CFD trading software. But don’t be fooled, even basic trades can get a little complicated. The trader has the task of modeling risk, against market volatility, pivotal market levels, and fine-tuning the size of the CFD trades. And when it comes to risk control and fine-tuning variables, even tiny changes can have a dramatic impact on the outcome. The purpose of the CFD trade is to either make a profit, outright. Or to hedge risk on another trade. But this could involve a series of multiple trades, and more complicated adjustments on the size of each of the CFD trades. And volatility has a lot to do with it. So as you can imagine, trading is not as simple as up or down, and adjusting outright or hedging trades can get quite complicated. That’s why a spreadsheet analysis can provide great insights, and help simulate a series of trading days. Some impressive CFD trading systems are based on spreadsheet analysis. The simulation is only semi-automated, as the trader can change the values of variables in any cell, directly. And this is even better than fully automated software where the user is restricted from testing various what-if scenarios. Volatility is well known to institutional Option traders, but now even retail CFD traders can take a closer look at this hidden dimension of the markets. Good CFD trading signals can be inferred from volatility alone. And profiting from these trades through CFDs is more direct, less complicated, and more accurate than any other instrument can offer.

A Spreadsheet as Your CFD Trading Software

Your CFD trading software should provide quick answers to various questions. Questions on volatility analysis and how the rest of the market, stocks or currencies, can react to that volatility change. So for example, if the volatility of crude oil moves too much in one direction steadily, say up. This means that the perceived risk of crude oil going much lower or much higher, is steadily increasing, and therefore the risk of USDCAD going up or down is also increasing. But USDCAD may not go up or down steadily, but rather trade deceptively for days, and then have one or moere big movement days. Trading this through the accuracy of CFDs can be improved further, through the insights of a spreadsheet. Trading CFD for a living is about few such facts and setups, is not about evenly distributed opportunity on every trading day. But the problem of working with the variables, that of volatility and fine tuning CFD trade size and the timing, is all it boils down to.

What are CFD Trading Signals

CFD trading signals are rather unique and different from all other trading signals, because CFDs can do things that other instruments cannot always do. And in some cases, only CFDs can be used to implement the trade. So even through the theory of looking at market charts and deciding how to trade seems logical and straightforward, trading through futures, options or other non-CFD instruments poses limitations. Largely because non-CFD instruments are not linear, and the trade can perform much worse than expected. And by worse we don’t mean losing more on a trade, but just losing an amount different than anticipated. If the trade is a hedged trade, even losing less money than anticipated on the outright trade causes problems right away, since it indicates the trade is not symmetrical enough, or calculated well, and next time that discrepancy will translate into a loss. CFD trading signals are trading signals intended to be implemented through the use of CFDs. So the accuracy of the linear CFD contracts is used as a basis, to calculate all other trades, such as a hedging trade, which will only be triggered if the outright trade fails by a significant margin. Trading CFDs for a living is all about accuracy and knowing your losses and profits in advance. You can test these in a CFD trading simulator environment, such as the platform offered in a CFD virtual account. You will see in no time, that accuracy (or lack of accuracy), can make (or break) all kinds of sophisticated trades. And the reason for trading in a sophisticated way, is so as to achieve lower overall risk, while maintaining good profit potential.

CFD Trading Signals Require More Attention

CFD trading signals require more attention on your part, compared to classic trading signals. But the rewards make it well worth it! Since the accuracy of CFDs is unparalleled, and unmatched by any other financial instrument. Online CFD brokers facilitate top notch trading for all retail traders. Trading which makes it possible to implement trades that would have been impossible and unheard of, just 20 years ago. And all this magic is available to the small retail trader, large institutional investors cannot trade through CFDs due to natural limitations. And moreover because no one can provide the same level of liquidity to these large traders, as retail CFD traders enjoy today. But for retail traders the limits are huge, and as high as $100 per pip. They can implement $30 per pip, sophisticated forex trades, with hedging protection and multiple trades involved, all at CFD efficiency. Investment banks despite all their power, cannot do this to such an extent.

The risks in trading CFDs are no greater than those in trading other instruments. And yet the benefits are asymmetrically larger and unique. CFD trading risks boil down to natural market risks. As all poorly planned trades face exposure to the markets and confusing volatility. Traders can do better than that, by assessing risk and being willing to specifically assess open losing trades over more hours or days. As opposed to assessing risk there and then, as classic trading would have you believe. Wise CFD traders hedge an open losing trade, and dedicate more time. Oftentimes, it becomes apparent that assessing open losing trades based on price action alone, is a big mistake. All trades start out as losing trades, and only price-time analysis provides a realistic view of what is likely to follow. CFD trading risks are really minimal when one dedicates time to assess their open losing trades.

The Key in Learning Trading CFD for a Living

It is unlikely that you will be able to trade for a living from the very beginning of your efforts. But the idea is to keep your trading stress-free, and pressure-free as much as possible. Realistically, success comes at an exponential rate, which is deceptively slow in the beginning. And becomes impressive after a while. But the transition from being a full time working person, to being a trader, is not compatible with the pursuit of a trading career. While all jobs require exact timing and adherence to deadlines, trading requires a rather loose approach. Trading CFDs for a living is a huge challenge at first, and it may intimidate many new traders. CFD trading signals, even the best of the best, can be mishandled out of carelessness and emotion. And market moves, even when predicted, can still be traded so badly, that the account will not survive the margin requirements. So don’t let assumptions fool you, into believing that trading CFD for a living is easy and has linear success. Don’t let negative thinkers discourage you either. You must find the right balance between unrealistic goals and realistic ones, and your friends are unlikely to help you on this. It is something unique for each new trader to figure out. The idea of trading online made easy can be made possible, when you rely more on yourself, and much less on other traders’ signals. It’s all about perseverance and coercion-free trading, while making that transition from full time job, into part time job and part time trading. It might only be trading for 1 hour a day, it is still possible to make the transition. But avoid coercion and strict deadlines, if you impose these on yourself, it will sabotage any good efforts you will be making.

Trading CFD for a Living and the Tipping Point

Trading CFD for a living starts with a strong determination, an open mind, and a lot of flexibility. Remember that success works exponentially, don’t even think about making predictions based on past performance. Trading becomes profitable in an exponential way. So on the way leading up to the tipping point, which defines success once and for all, you will still encounter big losing trades and unbelievable confusion in the markets. The trick is knowing how well your trading really is deep down, regardless of profit and loss. You might be very close to that tipping point, and you might be able to pass it, simply by avoiding one losing trade per week. This may include for example not trading at all on Fridays, or on Mondays. Some very deceptive signals tend to appear around midweek, with the market finally surprising everyone on Friday. Wise traders can actually detect these signals and trade accordingly. But even wise traders sometimes define certain days or hours, as not suitable for trading a particular strategy. Moreover, not trading is actually trading because the market moves allowing the trader to get a different price the next day. Simple things as this one, can help make the next step and go past the tipping point. And once past the tipping point, you will have more winners than losers, even with fewer hours of trading. The rest is left to online CFD brokers who will be taking your orders, and will be providing the right liquidity for you to place these trades and make money.

Top Tips for CFD Trading Systems

CFD trading systems are developed by all kinds of traders. And each one of those tends to be different and unique. What CFDs allow these traders to do, together with their basic perception of the markets is to handle market risk and uncertainty, in a more flexible way. So instead if using strictly defined, traditional stop loss orders, a more flexible risk control approach is used. This approach of flexible risk control, usually includes a hedging trade in the opposite direction, and a large size classic stop loss order. The linear pricing of CFDs allows the trader to be wrong about the market, much more often, and still make money. This is because the hedging trade covers much of the risk involved in a trade. But without necessarily being triggered should the trade go well. For example, the initial trade might be a long trade on EURUSD, with a large, modifiable stop loss order in place. That stop loss order most likely will not be triggered at all. And then, there is a contingent Sell order set in place, to act as the hedging trade on the initial long trade. But this hedging trade will only be triggered if the market falls by a certain number of pips, or breaches a key LSS pivot level for the day. Moreover, the hedging trade can be much larger than the original long trade, and as a result an offset point will be reached for both trades much sooner, should things go wrong. And at that offset point, the two trades together will cancel each other out exactly, the trader can close them both, and also cancel the contingent order. Online CFD brokers offer all this flexibility at your fingertips, and placing these orders becomes second nature for any trader. The good thing about flexibility in handling risk, is that you are able as a trader to take more volatility by increasing the size of the classic stops. And you only need to leave these classic stops in place when more and more uncertainty comes to the market. CFD trading systems can be further refined upon these principles, and in the hands of experienced traders they do work amazingly well!

CFD Trading Systems and Confusion

Markets create confusion every day, it’s a given and proven fact. Only fools should kid themselves by not expecting confusing trading days ahead. Trading CFD for a living requires embracing this risk and intimidating confusion. And the hedging principles, through using greater flexibility, allow you to do just that. You are able to wake up in the morning, not fearing to look where your trades stand. Because you know that confusion and volatility is a given fact, and most likely today’s early move will have fizzled out by tomorrow. So you can close the profitable trade only, and then adjust the trades left, so that big risk will be limited by the stop loss set in place. Once volatility changes again, you can interfere again, and add one more trade or change size on the existing ones. Today’s CFD trading software allows traders to measure the market fast, and accurately for the purpose of placing these trades. The flexibility is amazing, it’s just that most traders are afraid to take the challenge. They see flexibility as more risky and confusing. Maybe it is risky and confusing as seen on its own, but when mixed with the risk and confusion of the market itself, the net result is much more positive. Since these two risky processes actually offset each other. That’s where accurate pricing is needed most, and CFD trading systems offer just that.

Advantages of investing in foreign currency

Investing in foreign currency offers investors and traders of all kinds some unique opportunities. Stock investors are able to hedge part of the risk. While commodity investors and traders use currencies to achieve almost all their objectives. So investing in foreign currency goes a long way, and involves sophisticated methods for hedging risk in other assets. But also for hedging risk in a whole range of classic businesses. To the sophisticated investor, the forex market is a versatile insurance tool. A tool which if used wisely can limit financial losses, in case of unforeseen adverse effects. Airline companies for example are always looking for ways to insure themselves against sudden increases in the price of aviation fuel. This can be achieved through the derivatives markets, to some extend, by trading some instruments on the price of crude oil and jet fuel itself. But if the strategy extends out to currencies, then the whole hedging concept could become much more efficient. Simply put, commodity prices impact some currencies, and currencies themselves can have an impact on these commodities. And that’s why sophisticated investment banks and businesses cannot afford to ignore these patterns. Currency trading strategies allow these investors, as well as independent traders, to either mitigate risk on other investments. Or to make an outright profit on the markets. The forex market is so huge that not only is it perennially fast moving, but also the inherent market risk keeps creating new opportunities every day. Nobody can predict a currency rate 100% accurately, and not for 100% of the time. But there exists the potential to predict a currency rate well enough, so as to make meaningful profits. This means taking relatively small risks, in order to make some good profit.

The Concept of Investing in Foreign Currency for New Traders

Investing in foreign currency helps new traders understand the fundamentals in a major currency move. They want to be traders anyway, not investors. But learning to trade in a solid way, resilient to market noise, starts with investing concepts. Investing can beat market noise and day to day volatility, and help avert many losing trades. That’s why all wise veteran traders, no matter how they trade, always think as investors first. They pay attention to the daily market charts first, and only then focus on the specific day. All this data, charts and the various foreign exchange currency symbols are intimidating to new traders. But once they have developed the mindset of the wise, patient investor, they know where to stand. They know how much they can predict, how much they cannot predict, and how to handle volatility every time. That’s why they all practice currency trading so often, and treat each trading day as unique. Traders have to take routine and extreme discipline out of their trading and treat each day as unique. This helps think as an investor. And investors always look for that unique set of circumstances. This process includes geopolitics and technology not just economics and technical analysis.

How to Learn Online CFD Analysis

Online CFD trading helps traders of all kinds come up with new ideas all the time. This is because CFDs themselves are inherently innovative products, which broke the dogma of the trading world. In previous decades, investors knew only about stock trading, stock trading on margin and later about futures. The forex market was at a very primitive stage, where only investment bankers had access, and even fewer could figure out. And while the market risk is always there, evolution has at least made it possible for wise people to become top traders. Higher education is not essential, understanding of economics is not essential either. Moreover there is no universal truth in economic theory, and no one single economic model. It is possible for the average person, who is well motivated, to figure out real trading strategies and methods for these markets. By including CFDs in a trading strategy, the trader is now able to hedge risk in ways that are almost impossible to verbally describe, but are possible to describe through spreadsheet analysis and basic algebra. Online CFD trading allows to put these ideas to the test, and if successful, the trader stands to literally make millions over few months or years! This is because opportunity always exists in some places, but either risk or too much obscurity prevent the individual from exploiting that opportunity. And it gets complicated, because as one attempts to measure that risk and hedge against it, a minor oversight or miscalculation can mess up the entire formula, and yield the wrong number. The truth is that many events in the financial markets today carry risk, which can be almost completely mitigated through the right hedging strategy. And that hedging strategy can be implemented through CFDs trading. Online CFD brokers offer more than enough in terms of service and trading tools, that a trader will ever need in actual trading. The other part of the work involves simulation, modeling of risk in a spreadsheet, and a good imagination, which many young traders seem to have.

Online CFD Analysis for Hedging Trades

Online CFD trading for hedging purposes requires analysis on volatility and other metrics. But volatility is the number one field of research. CFDs themselves are linear and will do the job of hedging risk, easy to figure out and to implement. You simply trade from A to B, X number of points, and a CFD contract will provide the insurance needed. But together with market volatility, traders can learn when to execute that hedging trade, and at what trade size. Traders can start working on these two variables alone, volatility and trade size. And various attractive ideas will reveal themselves. Volatility is always a measure of market risk, but it works differently from market to market. So that volatility of the stock market goes up as stocks fall. But volatility of oil stocks goes down as crude oil falls. It’s because volatility measures fear, and fear hints that stocks risk going down on any day. And crude oil risks going to $200 a barrel during almost any week or month. Volatility creates asymmetries, ie stocks tend to fall much faster than they rise. As fear is always more pressing than greed. Using the right analysis approach, a good CFD trading software, and by being motivated, traders can excel in today’s markets. The opportunities will always exist, apparent risk and difference of opinion, as well as overall obscurity will always prevent the market from exploiting these opportunities. Trading online made easy through the use of these concepts and CFDs, is possible for those who are already even partially successful. It is certainly not easy for negative thinkers and people lacking original ideas. But many retail traders are original thinkers by their nature.