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Explore CFD Trading: A Powerful Platform For Skilled Traders

A Contract for Difference (CFD) enables you to open a trading position for the change in the price of an instrument, from the moment of initiating the trade to when you reverse and close it.

Notably, CFDs are leveraged products, implying that positions only require a tiny margin deposit to incur a significantly larger market risk exposure.
This leverage is a two-way sword with magnified benefits and risks: your initial deposit can generate out-sized returns and losses.

CFD trading permits you to initiate a position on the future value of an instrument, to capitalize on a price movement up or down. In this manner, investors are able to use unique forex trading strategies Thus, the inherent flexibility and financial leverage of CFDs also requires a sophisticated grasp of risk management and attention to market gyrations. While trading over the internet in general is an abstract process, CFD trading platforms are somewhat unique, offering transactions in which no transfer of ownership takes place.

CFD Trading Platforms

While CFD trading initiated on public exchanges, the rise of cloud computing capacity and explosive internet bandwidth allowed for the growth and flourishing of proprietary CFD trading platforms. This elimination of a public exchange allowed for transaction fee-free trading and a more personalized experience. Furthermore, the rise of a mobile ecosphere / environment has created a vastly enlarged community of Apps, both on Android and iTunes.

The breadth and variety of experiences available to traders using mobile cfd trading platforms is significant and therefore requires individual traders to personally review the offerings and evaluate how appropriate a given technology is for him.

Among the minimum features that traders expect in their mobile experience are:
professional trading functionality with a simple user-friendly interface.

The full spectrum of the world’s most widely-traded financial instruments.
Fast and efficient order execution.
Access to real-time quotes including: forex pairs, indices, commodities such as oil and gold, and widely-traded stocks.
Buy and Sell CFDs online: shares, NASDAQ stocks, NYSE and many more equity exchanges.
Initiate and terminate positions, set limits to manage your investment risk exposure.
View your equity, margin, and balance.
Full support in a variety of languages.
Real time signals and charts.
The ability to use credit cards wire transfer and the whole range of digital wallets to manage your account balances.

Forex Trading Strategies

The following example shows how a Euro – US Dollar (USD) position actually is initiated and closed:

A trader seeks to buy euro against USD. In the transaction / quotation he views a current Bid and Ask price similar to the demonstration line below:

1.0952 / 1.0957

The spread is the difference between the bid and ask values. Position holders can sell at the bid price and buy at the ask price. For the euro/dollar pair, a change in value of 0.0001 is referred to as a one pip change. Here we see the bid – ask spread as five pips.

To buy euros, the investor should establish a transaction volume (for instance, 2 lots which equals 200,000 euros) and then press the “BUY” button. The result of the operation will be reflected in the application (desktop or mobile) “Trade” window .

If we assume that the price has risen and the new values are:

1.1052 / 1.1057

The trader is satisfied with the position profit and decides to realize his gain. To do so, he must determine his closing position and click “Close on the current price”. The closing of the position (that is, selling the previously purchased euro) will occur at the price of the BID that is 1.1052

This transaction generates the following economic cash flows:

The trader will have bought 200,000 Euros (2 lots) at a price of 1.0957 by spending 200,000 * 1.0957 = $219,140
The trader will have sold 200,000 Euros at a price of 1.1052 and received 200,000 * 1.1052 = $221,040
The difference of the transaction is: $221,040 – $219,140 = $1,900 dollars
The sum of $1,900 is the trader’s profit in this case.

The margin deposit required for this trade depends on the leverage available, which in cfd online forex trading often reaches 400:1, so the required margin in the trading account would be $219,140 / 400 = $548 or denominated in any other currency.

From this we see that the return on margined capital: 1,900 / 548 -1 = 246%, a phenomenal profitability rate.

And while price movements of this magnitude can easily occur within a single trading day, so can the opposite. Furthermore, CFD positions are forcefully liquidated when the margin value reaches zero, so as a rough guideline, CFD forex trading strategies recommend that traders tie up no more than 2% — 5% on any given trade.

Comparing CFD Trading Platforms

The explosive growth in CFD trading platforms has made CFD online trading globally accessible. Through a variety of forex brokers, customers now know what is CFD trading.

What is CFD Trading

This post will explain what are the key elements with which to evaluate CFD trading platforms. These elements center on interface, service, and reliability. But each trader has their own favored set and feature ranking, so apply evaluatory criteria in a personalized manner, with the elements ranging from required to nice-to-have.

Ease of Access. In today’s 22/5 trading world, forex, share and commodity customers expect continual unfettered cross-platform access to all their global markets and positions. They expect a single unified interface from which they can rapidly and easily:

Manage account positions — At-a-glance summaries of opened positions, standing orders and closed positions. By using toolbar, tabular or drop-down grouping, toggling between modes should be an effortless experience.
Manage account balances — Friendly and intuitive interface to view cash and bonuses; one-click deposit and withdrawal. With the myriad of incentives offered and available, traders expect to receive real-time notice of their balances and how to use them.
View active markets and initiate trades — Filtering, grouping and selecting of financial instruments. Leading CFD trading platforms offer a wide variety of instruments. Clients expect instant access to the entire range through smart search and node-tree drop-down listing.

CFD Online

Customizable Charts. What with cloud computing and fast internet, traders expect their forex broker’s CFD online offering to include customizable charts for a complete modelling effort, Thus all the key elements in chart construction should be available for your usage

Time unit variances — Correctly defining the trading period is of critical importance for effective trading. Any graphical interface must allow you to visualize your exact trading horizon is one glance.
Multi-dimensional activity markers — The science and art of chart-reading are a subject of continual advancement, though the 200-year old Japanese candlestick chart representation is still the trader community’s consensus favorite. Less complex bars, lines and area representations also have their uses.
Cloud-based algorithm indicators — Traders expect turbo-charged algorithms to assist them in teasing out price movements. Popular indicators, whether based on averages, momentum, stochastic processes or more obscure calculations, must be available with a simple click.
Graphical alignment tools — Additionally, the super-imposition of geometric patterns is a valuable addition to the trader tool set.
Multiscreen capability — The ability to graphically display numerous different instrument activity graphs simultaneously is an additional capability of significant assistance to traders. This capacity helps in discerning correlative price movements.

Risk warning: CFD online trading and other forex broker activities are highly leveraged. Thus, your losses may amount to significant percentages or all of your initial deposit. Ensure you understand the risks, seek independent financial advice if necessary. The necessity of constantly monitoring your open positions is a requirement for this fast-moving financial channel. In addition, stop-limit orders are the preferred means of managing risk exposure and their usage should be a default assumption. Note: Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.

Best Forex Strategies for Traders

Forex strategies, or “how to trade forex” are an important element in the online trading world. This post will elaborate on what is forex, what are the winning strategies and how to use available tools, including forex charts.

The focus here will be on methodology, that is, approaches which have proven successful. Implementation of specific forex strategies is trickier to convey because of specifics inherent in any given trading instance, but if a profitable means is devised and understood, the inevitable personalization can easily be derived.

The following trading methodologies can work for you as they have for others. This list is not offered as comprehensive or even systematic, only as a set of helpful insights. Learning and using these techniques requires a continued enthusiasm and willingness to systematize your activity. Maintain rigorous trade books detailing your activity. Review the forex charts on which you based your decision making.

Forex Strategies

Also, take brakes from trading. Step back and contextualize to allow yourself to develop a perspective.

1) Trends

The truism holds: The trend is your friend. Over time, prices go up and they go down. And they go sideways. The insight here is the correct identification of trade action and movement patterns. Even in the case of pretense where the “recognized pattern” is an artifice, the usage in trading has a self-fulfilling confirmation and simple rules can yield a profitable trading regime.

2) Price Action

Price, a leading indicator, is the only variable. All you need to develop rules are in the price movement alone. Specify your entry points and exit points by price thresholds along. The logic here is that price movement is the ultimate reflection of human behavior and as such embodies predictable and repeated patterns. In and of itself, without any super-imposed artificiality or arbitrary patterns. PA can be analyzed using forex charts but in our 21st century hyper-computational environment, the default means of analysis is algorithms, using cloud data and computing and transmitted to smartphone wielding traders.

3) Divergence

This framework is a generalized method of using contra-indicators in an oscillating manner. Various parameters are continually reevaluated in comparison to one another to understand better causality and associativity.

4) Resistance/Supply, Demand, and Volume Trading and Breakout/Support

The flip side of trends is sideways action, a trading range within boundary limits. In this instance, expectations of boundary trading are fulfilled. Expertise here requires a greater understanding of non-price deterministic dynamics with factors such as volume and off line supply / demand parameters

5) Basket

Here, the correlation of forex movement, stemming from a temporal or permanent association between nations motivates traders to turn to factors affecting a group, like, for example, emerging market economies or commodity extraction economies. Thus forex chart watchers analyze currency groupings as baskets when exogenous variables enter consideration and evaluate the significance of the effects on overall movement.

How to trade forex

Each of these methodologies is worthy of consideration and traders are advised to try each in its stead in the attempt to understand how to trade forex. Additionally, to understand what is forex, and what are the appropriate forex strategies to use, a broader perspective is required.

Find Out All About Profitable Forex Trading Strategies

What is Forex

Forex is collectively the markets and institutions involved in the exchange of one currency for another. Learning what is forex and how to trade forex is a process like any other skill set for professional deployment. Discipline and analytic procedures are required to master forex trading strategies. Most critical is a methodical mindset capable of ruthless judgement on ferreting out undisciplined thinking and rationalization of illogical unprofitable behavior. Along with this is a requirement for a positive mindset that can iteratively return to issues for further reflection and new insights.

How to Trade Forex

To leave the ranks of amateurs and to graduate to the ranks of a profitable professional trader, you must devise a trading strategy and find a reliable forex borker. You must thoroughly follow and understand the underlying market and you must record and review your activity in an attempt to improve your approach.

For both your overall activity and the specific trade you are considering, have a strategy:

Which pair are you most familiar and comfortable with. Here the issue is both familiarity and risk profile. How well can you handle price gyrations (volatility)? and how well do you understand the underlying economies and their relationship one to the other
Decide on your time horizon, from day scalping, to open-ended short or long positions. This decision will greatly influence which market channel you choose, as rolling over positions on a nightly basis varies from not a significant cost element to the most expensive component.
Set the exit price for your position and place stop orders to lock in gains (and control losses)

Study the Forex market to develop forex trading strategies through the tools available on forex broker sites. Learn how to use forex charts and signals. Among the more popular indicators are:

Bollinger Bands — N-period moving averages (MA) with upper bands at X times the N-period standard deviation (SD) above the moving avg. (MA + Xσ) and lower bands at X times an N-period SD below the MA
MACD — Moving average convergence divergence (MACD) is a trend-following momentum indicator that displays the relationship between 2 MAs of prices. The MACD is arrived at by subtracting the 26-day exponential moving average (EMA) from the twelve-day EMA. Within this definition, A 9-day EMA of the MACD, called the “signal line”, is then graphed on top of the MACD, acting as a buy and sell lead signals.
Relative Strength Indicator — (RSI) The Relative Strength Index is an oscillator type indicator that moves up and down in response to movements in prices. Widely recognized as among the better indicators for valuing present market trend strength, the Relative Strength Index helps define 2 thresholds:
1. A value of 30 or lower is translated as”oversold” and signifies a potential price rise.
2. A valueof 70 or higher is translated as “overbought” and signifies a potential price fall.
Simple Moving Average — A simple moving average is created from computing the average price of an instrument over a specified number of periods. Generally, moving averages are calculated on the basis of closing prices. A 20-day simple moving average is the twenty day sum of closing prices divided by 20. As per its definition, a moving average is continually redefined as time progresses. Old data is dropped as the recalculated period becomes relevant, causing the average to move along the time scale.

CFD Trading Offers Very Linear Hedging

CFD trading offers the most affordable, most versatile, and at the same time accurate, dollar for dollar way to trade or hedge market movements in a linear way.

Why Other Instruments Failed to Win over CFD Trading

For years, many traders had been using Futures contracts as a way to hedge against adverse movements in the price of stocks, commodities and currencies. But futures have a big disadvantage in that their pricing is not precise. In fact the Futures market itself is predicting (based on statistical assumptions), how a Futures contract should be priced, relative to its delivery date. And while Futures offer great affordability through leverage, their lack of pricing precision is too costly, and makes it impossible to hedge a stock, say for a week. The stock in question may go down by several dollars in price, and yet the Futures market, which looks several months ahead in the future, may price the Futures on that stock at only few dollars lower. So that the stock for example has dropped from $100 down to $70, but the hedger having gone short on the Futures contract may well find that that Futures contract has only moved lower by $20, leaving them partially unprotected, and at a loss by $10 per stock! So because Futures are long term instruments, lack the linearity necessary to hedge shorter term trades. And when stocks go down, most of the risk is concentrated over few days at a time. This is just one example where CFDs come to the rescue, by providing ultra precise, linear (dollar for dollar) protection, at the same leverage and affordability that Futures would have offered! In forex too, all trades, through any forex broker can be linearly hedged through a CFD contract.

CFDs Win Hands Down over Futures!

CFD contracts in the hands of a reasonably good trader, results in much more profitable trades, as well as much much better protection against unforeseen risks. All CFD trading platforms today, more or less offer unique advantages, that no other broker (Futures or Options broker) can provide. Especially when dealing with hedging trades for small, or too fast price movements. CFDs have you fully covered long before Futures or Options even begin to settle down. I cannot stress enough what
is CFD trading capable of, it is simply the most linear way to trade fast market movements. Volatility risks are removed, for the most part, and all the trader has to focus on is their market there and then. They don’t have to worry what will happen in 3 months time from now, or if volatility goes against the market. The poor Futures trader is at disadvantage, because they are using a 3 month contract, and linearity is very poor. Even weekly Futures contracts have poor linearity and provide very crude protection in hedging trades.

What is CFD Trading Best Used For

What is CFD trading and how it can benefit you as a trader. The key advantages of CFDs are found in efficiency and flexibility not in their leverage.

What is CFD Trading in a Nutshell

Leverage is offered today in many trading instruments, there is nothing magical about it. Many traders are still not fully aware of what is CFD trading and how it works. Basically CFDs are derivative financial instruments which allow you to profit from market movements, but without owning or committing to own (buy or sell) the underlying asset at any time. CFD online trading has become popular among seasoned traders who trade commodities and currencies, as well as stocks. As far as stocks are concerned, CFDs provide tax planning flexibility, the advantage of being able to short a stock at any time, as no short selling restrictions ever apply, and the advantage of liquidity.
Because of better, one way liquidity, trading is faster and more efficient through CFDs than it can be through any other instruments. The spot markets (Forex and Commodites), as well as the Futures markets suffer from inherent problems, they all can be dealt with, except the issue of liquidity. A forex trader trading the spot market can find themselves in poor liquidity conditions, but a CFD forex trader will always be able to trade fast and at normal or near normal speed. As long as one trades up to $100 per pip, in the forex market, which most traders do, going with CFDs is much better. The forex spot market has its own pros and cons, and some prefer to trade through advanced and more costly ECN brokers, but these are million dollar forex traders. When one trades at $100 per pip or less, it’s just as efficient but much more affordable to trade through CFDs. Stock traders too, unless one trades stocks with very large amounts of money, there is no reason not to trade through CFDs instead. Plus they will have the short selling advantage when short selling restrictions are imposed.

Options VS CFDs

Options are complicated trading instruments for advanced hedging and neutral strategies. Options are good in some cases, where the trader knows what they are doing and trading is done efficiently. But Options require significant price movement, as well as knowing the volatility. The trader has to get both the market direction right, as well as the volatility. And as a result most new traders end up losing money even though they predict the market right. CFDs on the other hand are extremely efficient by themselves, if the trader makes a right prediction, no matter how small, they will make a profit right away. Many seasoned Options traders use CFDs in their complex strategies, combining both Options and CFDs, as opposed to using just Options, or Futures. So the question is what is CFD trading going to offer you as a small to medium size trader? It is going to offer you amazing trading efficiency, protection from adverse liquidity, and all the day to day liquidity you will ever need. CFDs protect from adverse spot market liquidity, just like a harbour protects ships from massive waves coming through from the ocean, but it still allows you to be in touch with the spot market indirectly, in a strongly favourable way. Liquidity is perfect for up to $100 per pip, in all currency pairs. Spot market forex traders are always at risk, because even the most liquid pair, such as EURUSD, can become illiquid during brief periods of time. CFD trading platforms are easy to use, and they make it possible to capture fast market movements just like you see them happening on your forex charts. The fact that seasoned stock Option traders use CFDs in their trading, instead of Futures or Stocks, speaks volumes. It is because CFDs provide the efficiency for fast, directional profiting which Options and Futures always lack.