There are a number of CFD trading strategies that you can explore when you are looking to figure out how to trade CFDs. Before you plunge into these strategies, you need to know all about overnight financing as this will make it possible for you to hold positions over a longer time period. Here are some strategies that you can use to help you experience the additional flexibility of CFD trading strategies.
If you are completely new to CFD trading check out our guide to get started.
CFDs that Go Short
The simplest of them all is the going short strategy, where all you are doing is selling your stocks at a higher price, and then buying them back at a lower price. This can be done at any time. Furthermore, your decision on when to buy or sell will be based on how long trend has held. The only way that you can lose with this strategy is when your position become more than your entry price and reaches the point you have chosen for your stop loss. It is an excellent strategy to start enjoying some profits.
Short Term Trading CFDs
When learning how to trade CFDs, a great place to start is by evaluating the short-term movements within this market. These are the movements that are made within a few days or that extend to a few months. The strategy here is to find the trend by looking at the moving averages. When the trend appears to be persistent, then you can use a higher moving average.
CFDs and News Trading
Good traders carry out research before they do any transactions or trades. One of the most reliable CFD day trading strategies is to pay attention to the news, especially on business websites or in the business section of a newspaper. It’s easy to find major events using an economic calendar.
You will find that there are patterns, and stocks can move up to 20% in the course of a day. Information that you can look out for is annual financial reports which can determine the movement of stocks in a day. To carry out this strategy, you need to have some experience in CFD trading and you will be able to get some good returns.
With an elevated level of skill, you can then try out hedging CFDs. This is a strategy to use if you are looking to bring down the overall volatility in your portfolio, especially if the market has proven to be unstable. With this strategy, what you are doing is short selling a CFD for a similar number of shares to protect yourself from making a loss. This can be done in short term over a period of days, or can also be used as a long term strategy over a few years.
With these three CFD trading strategies, you can easily develop your skill in CFD trading over time.