The Top Five CFD Trading Strategies of 2017
Online Contract for Difference commonly referred to as CFDs are very much similar to the strategies of trading in shares. The primary difference between the two is that you need relatively low capital to kick off in CFD trading. CFDs and Investing in CFDs allows one to make profits as a result of changes in the prices of underlying financial instruments. One doesn’t need to own the financial instruments necessarily. This type of online trading is relatively new, and it is gaining popularity because of the many benefits that it offers to the traders such as CMC markets.
The various CFD trading strategies are similar to the traditional stock exchange policies. However, the CFD strategies are highly flexible and offer considerably higher levels of profitability. The CFD investors are capable of exploiting a diverse range of approaches complemented with the possibility to apply Contract for Difference to go short and open up numerous investment opportunities. Here is a summary of the various CFD strategies that one can easily pick from and work with;
Going Long CFD Strategy
The primary motive of this strategy is buying low and selling high. Taking a practical example, we would go for FMG since you realize that it is on a steady upward trend in 2017. The strategy demands that you remain vigilant and trade in the direction of the market trend. Your primary aim here is to ride on the rising trend of FMG for as long as it lasts. This type of CFD trading strategy is suitable for all times. Trade length is determined by the volatility of the trend and the closeness of your trailing stop .Going long strategy is the most basic CFD trading strategy, and it is the most suitable for a beginner who has little experience. Note that you need to get out as soon as your position turns lower because the more you stay, the more you risk losing everything as your position hits below your entry price.
Going Short CFD Strategy
This strategy operates on the principle of selling high and buying back at a lower price. You wait to invest in shares of a company that you are sure will fallout with the investors hence a sharp drop in the value of their shares. A good example would be the TPG Telecom shares. After three years of major success, TPG finally falls out with the investors. This strategy is ideal for traders who understand the dynamics of short selling CFDs.
News Trading CFD Strategy
News trading strategy involves monitoring news items in the business section in local newspapers so as to identify volatile stocks that you may trade in on that specific day. The principal motive is to buy or sell in a fast moving motion driven stock of the day. Such stocks are identified by watching daily reports on trading platforms. If you notice an R mark on your shares, investigate the shares and decide swiftly whether to buy more of them or sell. The strategy lasts for a few minutes to a day, and it is ideal for experienced traders with reliable DMA price feed.
Zone Trading CFD Strategy
The approach favors investors who believe that the market can remember and history is bound to repeat itself. As a trader, you operate between levels of support and resistance of market forces. You buy at the support levels and sell when the market is nearing its resistance level. The strategy has a timeframe of few days to about two weeks and is ideal for all traders.
Pairs Trading CFD Strategy
The pair’s approach takes advantage shares that exhibit high levels or correlation that may slip out of correlation with time. For example, you may notice that Company A and company B CFDs move in close relation, but with time you start to notice that company A starts outperforming company B considerably. At this moment, you take trade by shorting company A and going long company B and sit back and wait for both stocks to start exhibiting high correlation levels once again. The strategy lasts for weeks to a few months, and it is suitable for sophisticated traders who make use of charting software with the ability of tracking at least two stocks concurrently.
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