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CFD Trading Strategy for Commodities

Commodities are simpler to trade compared to stocks. A simple CFD trading strategy can be developed around the 200 bar moving average and some basic numbers.

A CFD Trading Strategy Does Not Have to Be Too Complicated

A CFD trading strategy can be as simple as commodities can allow. More specifically, commodities are often easier to analyse based on supply and demand information and overall market momentum.
Trading CFD contracts on commodities is just as risky as any other instrument or asset, at least for the most part. It is only when some risks are removed, that things become easier. Stocks remain risky and confusing for the most part of the trading year, because there are too many factors impacting stocks. Currencies are mixed, some are easier to predict than others, and then there are commodities where some insights can be obtained for the coming months, and traders can adjust their strategies accordingly. Online CFD trading becomes less risky and smoother when at least some big risk factors have been taken into account, or are not present at all for some time to come. In commodities one has to take into account the entire commodity index (CRB), and various factors impacting the single commodity in question. Commodities tend to trade out of phase for a while, so that the CRB index may rally for example, and some commodities get left behind for months. Eventually however every lagging commodity will end up rallying so as to catch up with the CRB index. So during that phase the downside risk in that lagging commodity will be significantly reduced.

CFD Trading Strategy Based on the 200 Bar Moving Average

A simple CFD trading strategy for commodities is the 200 bar moving average, or at least a good part of such a strategy. The idea is that if the market gets close to, or within proximity of this moving average on the daily or weekly chart, then it will likely test it. The idea can be tested through a strategy implemented on reliable CFD trading platforms, so that leverage is used, and convenient contingent orders are set in place. So when a test of the 200 bar moving average is suspected to occur, this doesn’t necessarily imply a change of the major trend, but maybe possibly a series of false buy and sell signals as price will approach and test that level. The test itself may result in a reversal at the moving average or a breach. Sometimes there are no fundamental factors involved, and such test moves are driven by speculators alone, who trade on a short to medium term basis. There is no magic, generic formula for commodities, as each commodity has its own unique factors. So that agricultural commodities for example are impacted by weather conditions for example, whereas precious metals by other, totally different conditions and factors. So it is possible to have all commodities rallying in general, and yet one may test the 200 bar moving average to the downside, while another commodity may test it to the upside, in all kinds of confusing ways.

Making Use of Forex Trading Tips

Following forex trading tips seems like an easy way to make money. But one has to expect and embrace uncertainty and confusion even in this kind of trading.

Profiting from Forex Trading Tips

Forex trading tips are great, but one has to be careful even with the most reliable sources of such tips. Because volatility and unforeseen factors can ruin the timing of the expected market moves, and create all kinds of issues. The most common issue is misjudging the market, whereby a tip suggests that this or that currency pair will make a move in a specific direction, but there might be significant counter moves before that happens. This kind of unforeseen volatility can trigger stops very easily and result in big losses. So stop placement is important. The stops have to be large enough, most of the time, so as to tolerate such volatility. And in times of fragile markets, where the major trend could change, one has to use multiple trades and of different size, in the same direction. Those trades will vary in terms of risk tolerance, so that the large size trade will have a much tighter stop. Following the tips and treating them as solid forex signals is actually a bad idea, rather one has to keep an eye on their forex charts and question that tip, in terms of reliability and timing.

Which Forex Trading Tips Work Best

Forex trading tips which are loose in nature, and allow for some personal judgement and flexibility seem to work much better. Especially better than those tips which define small and fast price movements, and where the entry and exit price levels are strictly defined. As with all things in real life, the tighter your plan, the more likely you are to face something unpredictable and difficult to deal with. Trading is one of those things where ultra tight planning does not work! All you want to know from your trading tip is underlying market direction over some reasonable length of time. So that you have time to deal with open losing trades, and know which ones to close and which ones to keep or even add to. The global forex converter mechanism is peculiar and volatile, and it does strongly favour tips which focus over few days rather than few minutes or hours. It also favours the loose, flexible approach rather than exact entry and exit price levels. So trading tips which offer exact information, and attempt to capture 20 or 30 pips on a given trading day are usually tips based on momentum. Momentum is good, but all its indicators are lagging in nature and can be highly misleading. The reason why these tips are so tightly planned is because that’s what their audience demands! And even when these tips are right, the trader following them stands to make only 20 or 30 pips, which is not the best way to make serious money in the markets.

How to Make the Best out of Your Forex Account

In order to make the best out of your forex account, you will have to make use of the various trading tools available, in harmony with your trading skills.

Using Your Forex Account More Efficiently is Not That Much Difficult

Most traders, especially new forex traders fall victims to marketing hype about easy and effortless profits. As a result, they tend to become lazy, overconfident and to rely too much on one trading tool over another. Traders who make money on a consistent basis on the other hand, are different, in that they use various tools in their forex account, anything from forex charts to calculators and indicators. They do so in a balanced way, often cross-checking their beliefs against more indicators before making a trade. All their forex strategies contain an element of doubt, where they would question even the best of market conditions and trading signals. You may wonder what is forex trading if no certainty and accuracy are used. But markets work in a peculiar way, where too much accuracy and too much certainty are just as bad as having no accuracy and certainty at all. So one has to find the right balance in between the two extreme ends. Your forex account provides that single window to the markets, where a lot of insightful information can be obtained and processed in a very coherent way. Many profitable traders make $100,000 a year, all through a single account, and one or more strategies. They still have losing trades and make mistakes, but accuracy is good enough to support profitable trading.

Your Forex Account Can Offer More than You Think

Your forex account can indeed offer much more profits, all without the need for additional computer screens and charting packages. All you have to do is focus on the tools available, and use them selectively, as each different strategy requires. Most good traders watch the daily charts few times a week, and only at quiet times, while they watch the four hour charts of their currency pairs much more often. But there is no need to watch down to the minute or one hour charts when you make and hold a trade for few hours or days. By applying such notional filtering criteria, you are able to stay focused, without becoming overwhelmed with information. Then, there are those trading tools, contingent orders, calculators and so on, that help calculate and place accurate orders, all with a reasonable trading plan, but one where super accuracy is not required. It is perfectly possible to trade out of a single computer screen, all through the tools and information the trading platform provides. Also, there is no need to have multiple trading accounts, unless some very advanced trading strategy is used. For just about anything else, a single trading account works just fine, and provides precise figures on the task of money management and total risk tolerance.

How Good Forex Software Benefits Traders

Forex software helps traders make money by providing a view of market price fluctuation over time, and by making trade execution easy to handle and error free.

Good Forex Software Facilitates Trading Tools And Runs Smoothly

A good forex software must be capable of delivering in all aspects of a trader’s needs, including insightful forex charts and implementation of advanced forex trading strategies. Unfortunately, event to this day, many forex brokers still suffer from poorly designed software and inexcusable errors and latency times during trade execution. More precisely their clients pay the price, since all that badly designed software ends up costing them money in unnecessary losing trades, as well as badly placed trades. Most software issues in large software firms arise from the fact that software architecture and concept is kept secret to a good few programmers. Who then divide up the entire project in fractional parts and source them out to various other programmers. This is all for security reasons, so as to prevent espionage within the industry, and prevent their competitors from copying their software. The problem in large software projects that are made this way is that many critical faults go unnoticed, many bugs in the code which are triggered only when those fractional pieces are put together, and only at certain times during software use. Real life examples of this, have been seen over the years, where computer glitches caused massive sell off days at the NYSE, and of course in the software of those aforementioned brokers, where once again there is no single person to debug and assess the entire code. Similar issues are found in all kinds of software, not just in trading software. Even in the aerospace industry, software engineers have to spend many days, to figure out why a missile system or radar, does not work as expected. Again, it comes down to the issue that too many people got involved in writing the code, and some bugs have not been spotted.

Good Forex Software Works Like a Swiss Clock

Good forex software on the other hand works very efficiently, because a single programmer, capable of fixing not only bugs, but also bugs waiting to happen, took the time to make the software error free. These are programmers who also understand forex trading, not just programming. And who took the time to learn forex trading at some level, as well as understand how factors such as volatility and liquidity can cause all kinds of problems. Good forex brokers, and not necessarily the most advertised ones, run solid software where many issues have been addressed in advance. They are able to provide a very reliable and accurate trading platform where one can trade with confidence. This is a very important criterion for choosing a forex broker, since only a handful of brokers run reliable software.

Trading Forex For Results

Trading forex is an experience with the world’s largest and most liquid market. The principal participants span the entire range of size (from virtually capital-unlimited central banks) to individual traders with under-$100 capital margin, leveraged to a factor of 400 or more. Similarly, their motivation span the entire risk attitude spectrum — from those seeking to profit from currency gyrations (speculators); To those seeking to insulate their underlying economic activity from international events beyond their control (hedgers); To everyone in between. And, as with any marketplace, the different participants also have different time perspectives.

Forex Vocabulary

Invest the time to learn the basics of trading forex: Including forex signals and forex charts. At this early stage in your pursuit, strive to master techniques which are not naturally your temperament or ability. Master basic terms such as:

The national currency you are using for the purchase is the base currency. The national currency that you are acquiring is called the quote currency. In trading forex, transactions involve selling one currency to buy another.
The exchange rate denotes how much one has to spend in quote currency to buy the equivalent base currency.
A long position translates into buying the base currency and selling the quote currency. As an example, you might sell U.S. dollars to purchase the Euro.
A short position means that you would purchase quote currency and sell the base currency. In other words, you would sell the Euro and buy US Dollars.
The bid price is the price at which you (or your broker) is willing to purchase the base currency in exchange for the quote currency. The bid is the best price at which you would consider selling your quote currency on the open market.
The ask price, (also called the offer price), is the price at which you (or your broker) will accept to sell base currency in return for the quote currency. The ask price is the best currently available market price for which you would want to buy the currency.
A spread represents the difference between the bid and the ask prices. ^[1]
A pip measures the difference in worth between 2 currencies. Usually, one pip equals 0.0001 of a difference in value. For example, if your EUR/USD trade moves from 1.063 to 1.064, your currency value has increased by ten pips.

Forex Brokers

Find a broker with experience and a track record. In the business world, caring for your customers is the key to longetivity.
Confirm that the broker is subject to regulation by appropriate national and international authorities. A regular submission to government oversight helps confirm the broker’s honesty and transparency.
Review the broker’s variety of offerings with the clear implication that the larger the product base, the more disperse and diffuse the customer base.
Troll reviews but with a wary eye. In our era of confessional deterministic ratings, brokers, like all businesses with an online presence seek to game the system.
Visit the firm’s web site. It should look professional, and offer full demo account functionality. Trading should be simple click-through and confirm. Ensure that a modicum of forex charts and forex signals are offered.
Verify any transaction costs. Review the ease of depositing and withdrawing funds from accounts. Examine any commissions incurred for funds transfers.
Focus on the essentials. Try out the customer support.

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.