CFD Trading Strategies

1. CFD Trading Strategies The strategies used for a CFD are almost identical to those used for regular stock trading. However, you will see there are a few subtle advantages which allow investors some flexibility and potential for even higher profits. Leverage is used by traders when using various CFD trading strategies. The idea behind leveraging is a small portion of an initial capital inlay is used to acquire any gains and losses which are from a larger position. This is the reason many traditional stock investors choose to make the transition to CFD trading. There are many types of CFD strategies available to investors. The most common is the use of positions that are long and short. There is also a short-term position and a long-term position. Swing trading and hedging are other CFD strategies that can be used by investors. One aspect about CFD trading is it will involve the buying and selling of contracts or assets. Long and Short Positions Investors who are active on the market engage in a long position when purchasing an asset. There is an expectation that the purchased asset will see a gain in value over the time a CFD is being held. Any short position is when an investor sells a contract and intends to buy it back at some later date. The expectation of a short seller is the value of the contract or asset will fall over time. A rise in the value is likely to lead to a loss equal to the difference in value between the opening price and the closing price. Short-Term and Long-Term

2. The timeframe for a CFD trade is another essential aspect. Short selling is similar to day trading and is a strategy that allows traders to profit from trades made in minute or hour increments. Many short-term traders use this type of CFD trading strategy among others that are available. The main advantage with short-term trades is limiting financing costs. Long- term trading is another strategy that may be used by investors. The benefit of long-term trading is capturing larger price moves. However, an asset needs to be held for many months to a year or more. Swing Trading Smaller reversals that occur within larger trends is the premise for swing trading. This is an attempt for a trader to benefit from smaller market moves. One example is the retraction of asset prices from highs the previous day. Many times this can be caused by unrelated industry news, which negatively affects a class of assets. This drop in price minus any market news can be seen as a buying opportunity. Whenever a class of assets rebounds, then a CFD can be sold for a profit. One thing to keep in mind about swing trading is the opposite is true during a bear market. One reason is not being able to easily spot the reversal point for an asset. This is when a price movement has started to move in a positive direction. Selling too soon may limit profit or even lead to a loss. Hedging This is a type of CFD trading strategy that is protective in nature. The goal is to protect gains and limit any potential losses. Most times a trader already has an open position and is seeking protection from the loss of value of an asset. This is done by opening a position that is the exact opposite. One asset is at a losing position and the other will be in a position to make gains. This creates a balance which nullifies a significant loss. The main advantage of this strategy is protecting an investor's total position. Check out https://tradinglounge.com/CFD-Trading-Strategies