Are we right in thinking youâ€™re considering CFD trading as an investment because you think youâ€™ve got what it takes to be successful? There are thousands before you who thought just the same. And many of them have been terrible losers. The truth of the matter is, CFD trading requires an element of planning, and that includes developing a plan and brushing up on your CFD trading education. Basically, you need to learn to trade CFDs. Itâ€™s not a skill youâ€™ll have been born with. But where can you go to get some helpful advice? Itâ€™s likely your local college doesnâ€™t run evening classes but donâ€™t worry because we are going to help. Youâ€™ll also be pleased to know there are a number of other online courses which you can use. On the whole, CFD trading strategies tend to follow those used by traditional stock investors. However, there are a number of very minor differences. These differences enable you to be flexible and offer the chance of more profits. By using leverage you will be able to use a wide variety of strategies to increase your gains over a shorter period of time.
Most common types of CFD trading strategies
There are a number of strategies used by CFD traders, but to make things a little simpler weâ€™ll be taking a look at those which are used more often than others.
Long versus short – In the world of CFD trading when you purchase an asset this is known as going long, or a long position. You might do this because you are expecting the asset to increase in value over the term of the contract. Going short, or opening a short position, on the other hand, is when you sell an asset intending to buy it back sometime in the future. When you go short you are expecting the assets price to fall over the term of the contract. Is this doesnâ€™t happen and the price rises your trade will gather losses that are equal to the difference between opening and closing prices.
Short-term versus long-term trading – Short-term trading, also known as intraday trading, allows you to profit from changes in price that happen very quickly. The timeframe could be 1 minute, one hour but most certainly less than one day. Many of the most popular trading strategies can be used if you decide to be a short-term trader. An added advantage is you will be able to limit financing costs. Some traders, however, prefer long-term trading because it allows for a higher level of forecasting. Long-term trading means you can also capture larger price moves because the trades last from a month to a year and possibly even longer.
Swing trading – This CFD trading style attempts to benefit from small reversals (swings) within larger trends and is possibly one of the most popular ways to trade. A swing trader looks to avoid markets which arenâ€™t trending and instead concentrate on those which are trending in a certain direction. You will need to make use of technical analysis to identify the assets most likely to move in price and provide a time frame and values for entering and closing the trade.
Pairs trading strategy – This is another popular CFD trading strategy for many regular traders and is a great way to double up on both the gains of certain market movements as well as counterbalancing markets moving in unexpected directions. Choosing to adopt a pairs trading strategy requires you to open two related positions, one going long and one going short. Thereby creating a direct trade-for-trade hedge. Usually, the trades would be chosen within the same industry. This effectively gives you a better chance of making a profit.
Momentum trading – With a momentum trading strategy it will be possible for you to take advantage of heavy movements in price via the transparent price movements of certain assets. You will need to be able to identify trends and then wait until the trends take effect before opening a complementary position. This might seem an easy strategy on the surface, but adopting it will require a degree of understanding of the markets. You will need to choose the right positions which will require you to interpret the effect of corporate and economic announcements as well as analyzing charts and historical price data.
Technical trading – This is a very sophisticated trading strategy, and possibly not the best option for a beginner or the faint hearted. It is usual for traders to include a certain element of technical trading in whatever strategy they choose, but if you feel confident at analyzing data and statistical processing technical trading might be for you. You will be required to analyze graphs and price charts in order to determine certain patterns and recognize certain deviations. Spotting them successfully will result in a profit. Whether you want to learn to trade Forex or CFDs technical trading is also a way in which you can gain a feel for the markets.
Hedging strategy – This is a process whereby you position yourself as safely as possible by offsetting long positions with matching short positions, thereby guaranteeing a profit. Regardless of whether the market moves up or down. It is a very flexible way of trading CFDs as it is possible to take positions either side of the fence.
Scalping strategy – Scalping is a way of pinching quick profits from trades, either by closing out early or moving on when another opportunity for small profit presents itself. When CFD trading it can be a very effective strategy to adopt if youâ€™re looking for a steady stream of profit. However, itâ€™s not the easiest of strategies to execute.
The Triple Screen CFD strategy – As you might imagine this trading strategy uses three screens or charts to confirm the right time to trade. It was first described by a guy called Dr. Elder. He actually used it when trading futures contracts, but it works equally well with CFDs. The first screen is a long-term trend indicator. The second identifies temporary corrections to the long-term trend, and the third screen is used to determine the timing of your trend. This is really a small selection of the types of strategies you can choose to adopt. And when youâ€™ve gained more experience you may well find yourself in a position to develop one of your very own. So what else is there to learn if you want to trade CFDs or Forex seriously?
What you need to learn in order to be a successful online market trader
When youâ€™re looking for a top rated CFD broker you will find a range of educational material is made available. Some offer huge amounts, so much it would take you weeks to work through it. Others, on the other hand, offer very little in the way of CFD and Forex trading education. Which we have to say we find a little unappealing. Some say becoming a trader is a never ending journey of education, and youâ€™ll never be at the top of the tree. But there are so many resources available youâ€™ll certainly be able to do the best you possibly can.
What is on offer in the world of CFD and Forex trading education
To help you get over the learning curve and learn to trade CFD youâ€™d be advised to sign yourself up for a training course. Basically, these can be divided into two main categories. Online courses and individual training. Whatâ€™s the difference?
Online Forex and CFD trading courses – Think of these as distance learning courses in which a presenter will provide you with eBooks, trading simulations, webinars, seminars, and video training courses. A number of brokers provide this type of material free of charge, while some make additional charges. As a complete trading novice, you will start at the bottom and work your way through beginner, intermediate, and advanced levels.
Individual CFD and Forex trading courses – Individual trading courses are generally much more specific, and itâ€™ll be a sensible idea to get some basic training before you sign up for this option. The person running the course should be a successful trader and will guide you through the intricacies of trading strategies and risk management. You may find you have to pay for such an individual trading course, but there are also a selection of CFD and Forex brokers who offer this kind of service as part of a premium or VIP trading package. So what should you be looking for in a training provider? Letâ€™s share some factors you should consider before signing up.
What to look for in a Forex or CFD training provider
Whatever type of training youâ€™re looking for, there are a number of things you should take a closer look at before you learn to trade CFD or Forex with a training provider.
Does the CFD trading course have a good reputation? Just type â€œCFD trading coursesâ€ or â€œForex trading coursesâ€ into your search bar and youâ€™ll be greeted with thousands of hits. So many you will have to try and narrow the search down a little which can be done by concentrating on those with a good reputation. Youâ€™ll need to weed out the scams promising unbelievable returns and instant profits. Donâ€™t believe everything you read and take the promises with a spoonful of salt. The best CFD trading program wonâ€™t guarantee anything apart from useful information and CFD trading strategies which are proven to work. How can you gauge the reputation of a trading course? By discussing the subject with other traders and participating in online trading forums. Gather as much information as you can from other traders, preferably ones who have participated in training courses and youâ€™ll be confident youâ€™re making the right choice.
Is the trading course certified? The best trading courses are those which are certified by a regulatory body or financial institution. For those of you trading in the US these could be one of the following:
- Securities and Exchange Commission
- Financial Industry Regulatory Authority
- National Futures Association
- Futures Industry Association
- Commodity Futures Trading Commission
For those of you residing in other countries, there will be other regulatory boards and international courses will be certified by a range of different organizations.
How much will the course cost and how long will it last? This will vary from provider to provider, and depend on whether you choose individual mentoring or internet-based learning. An individual course is likely to require a more solid commitment than an online course, so itâ€™s vital you decide whether you want to learn on a flexible basis or more regular schedule.
How to avoid the training scams Youâ€™ll find training providers promising 400% returns in a day, and some claiming they can guarantee even more. But is this really possible? Are there really ways of trading with which you canâ€™t possibly lose? We think you know the answer to these and similarly unbelievable assurances. Absolutely not! Of course, youâ€™re going to be tempted to give them a go, but our advice is to steer clear. Any guarantees in the world of online trading are only a scam. And it seems that the number of companies and providers scamming ordinary people is consistently rising. One way to check whether a trading course is not a scam is to carefully read the terms and conditions. And determine whether the promises are unreasonable. Also double check any certification to ensure it is authentic. If youâ€™re not certain whether you want to commit to such a structured way of learning youâ€™re probably wondering whether there are any other options.
Top 3 CFD Trading Brokers
Are there any other ways to learn to trade CFDs?
Training courses are the perfect way to learn about CFD or Forex trading, but this method isnâ€™t going to suit everyone. There are, however, a number of other options, particularly if youâ€™re a beginner. If youâ€™ve got the patience, time and willpower you can always choose to teach yourself. With the aid of various material you can find free online. There are trading books, free articles, fundamental and technical analysis and professional strategies to choose from. There are various online trading courses provided some of the top rated CFD brokers in the industry and you can sign up for a selection of trading forums and discuss things with other traders. And while you are doing this, why not open up a demo account? Youâ€™ll be able to get in some practice before you start risking your own money. Most reputable brokers offer new clients the option of a demo account. Itâ€™s not going to cost anything, so why not take advantage? Youâ€™ll also get the chance to try out various trading platforms and get a feel for the broker at the same time. CFD trading takes place in a highly volatile marketplace and the best advice we can give you is to make sure you learn as much as you can. Not just the good things but the things to steer clear of as well. Only by getting a balanced education will you stand any chance of being a successful trader. Spend some time educating yourself and get in some practice as both are invaluable experience that will pay dividends in the long run. Why donâ€™t we finish up with a few helpful CFD trading tips:
- Donâ€™t worry too much about making money. Instead, concentrate as hard as possible not to lose any.
- Think about ensuring you have an edge – Be disciplined, diligent, work hard and stay focused.
- Be aware of the power of leverage – Remember prices go up but can also go down.
- Make use of stop losses as they can greatly minimize your losses.
- Establish and clearly define your own realistic trading goals.
- Get into the habit of keeping a trading journal.
- Make sure you have a well-defined trading plan.
- Maintain your discipline at all times.
- Try and keep a positive mindset. Try and have some fun and take the time to learn the basics.
We intend to provide you with as much information as possible, and there are so many other ways to improve your knowledge there is no excuse for starting a trading enterprise without, at the very least, learning the basics. If youâ€™re a complete novice youâ€™ll have to start from square one anyway, but there is no reason to set off leaving yourself in the dark. If you want to learn about trading either Forex or CFDs, unlike a number of other markets, there are a good variety of learning tools you can take advantage of, and resources which will serve to lighten the load. Itâ€™s easy and simple to become CFD-savvy by using a virtual demo account, a mentoring service, an online course, online and paper resources, charts and signals services. You should have a good idea now of where to start, so get on with it and start learning. There is, after all, no time like the present, and the quicker you learn the sooner youâ€™ll be able to start trading.