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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.

Scalping the Right Markets in Online Forex Trading

Online forex trading becomes almost directionless when one is doing scalping. The methods used in scalping are more about preparation than actual live trading.

Why Scalpers Work Outside Online Forex Trading Active Hours

Online forex trading tends to be most active, in terms of volume, during particular time zones. And this is when most breakouts typically occur. But scalpers being directionless in their view of the markets. They only want to see flat trading action, where the market seems to be going nowhere. This ensures that the risk of a breakout is significantly reduced. Most wise scalpers use an online forex trading platform which offers maximum possible efficiency. And for wise traders this is always a CFD trading platform. Because only that can offer maximum possible liquidity, best filling prices, and linearity. Leverage helps magnify tiny market moves, of anything between 5 and 30 pips. And this turns tiny market moves into significant trades. But it is the linearity of CFDs that actually makes efficient scalping possible. Because CFDs follow the actual market very closely. So closely, that other trading instruments never can.

Online Forex Trading Becomes Profitable through Scalping

Online currency trading is very difficult for most beginners. Because they tend to get stuck on the losing side of the market for too long at a time. Resulting in heavy losses, and uncertainty about market direction. Moreover, beginners don’t know how to handle risk and properly assess their losing trades. Scalping is better in that regard, since the trader only has to trade small moves either in one or in both directions. But over the span of several hours, they are totally directionless. One hardly needs to fully learn forex basics when they engage in scalping. All the preparation for the scalping session is very basic to slightly complicated. So anyone can at least understand it fast. Basically, it’s all about identifying the few hours when a currency pair will be most inactive, and least volatile. This will be the out of hours trading time zone. So, someone wishing to scalp the EURUSD pair for example, can do so during the late US and early Asian trading session. Especially the Asian session best suits EURUSD scalping. But the same logic can be applied to many more pairs. The potential profitability of scalping is enormous, and in the case of CFD trading accounts, as much as $300 per scalping session. This figure is based on medium size, accounts of around $2,000 to $3,000, moderate leverage and careful day selection. The risk of a breakout is still there, but traders use stops to limit this risk. The losses from bad trades can be recovered very fast too. In actual trading tests conducted by average traders, it was possible to have 30 winning trades in a row. These were small winning trades, but they amounted to a very good monthly sum.

The Trickiest Part in Scalping is Determining the Price Baseline

Scalpers don’t have to worry abut market direction, that’s for swing traders and position traders to worry about. Scalpers only need to identify the most quiet days, and specific time zones. And to also determine the price baseline in any given scalping session. All losing trades in scalping arise from poor judgment of the baseline and overall expected volatility. As the market may seem to trade flat at a given level. But then it may jump higher, and trade the rest of the scalping session, flat at the new higher level. Believe it or not, it is possible to dig deeper into market data and assess both volatility and price baseline a lot better. Once the price baseline has been determined. The scalper then simply repeatedly sells rallies above the baseline, and buys dips below the baseline.