Understanding how CFD Trading works
As is stated by Alexandra Cain, it is quite possible to short a bull market, although new traders should always go with the trends. Different market conditions call for different approaches as far as CFD trading is concerned. The only thing that simply needs to be done is to go back to the drawing board and come up with a strategy that is applicable to the current state of the market. In fact, despite an upward trajectory of the markets, the possibility of shorting it is still very high. However, it would be better for traders especially the inexperienced ones to follow trends instead of bucking them. This certainly increases the chances of making good money.
Taking a counter-trend approach in trade is possible, although it is more apt for experienced traders who have been present in the market for a longer period of time. The basic message that is being passed across is that you should never go short into an instrument which has a price that is going up. This will help you in avoiding unnecessary losses.
As a trader, you should always pay more attention to the trends and positions. From a technical perspective however, the rules of trading short should not be any different from those of long positions. Of importance to not is that short positions have a tendency to moving faster than long positions and hence, the need to pay more attention on short positions. While shorting also, you must be clear on where you would like your entry and exit levels to be in the market.
You must be able to determine your risk level and how you can possibly exit the market. Overcrowding should also be observed because if there s a large number of shorts on a particular tock, then a reversal in the market’s direction will be noted.
CFDs and EFTs are important as they are the instruments that are used by investor who would like to gain trading exposure overseas. Going offshore can tremendously broaden investor’s opportunities globally, although caution must be exercised as the strategy is never apt for all. Offshore investments offer you the ability of applying generic strategies into markets that are more corporate. The strategies applied also focus solely on volume and price movements instead of just the underlying basics. One point to note also is that the difference in time zone may hinder an investor from staying in touch with their trading positions.
You must be on top of your game and create an edge by grasping local knowledge on the economical, political environment and current affairs. When trading with companies that deal in different base currencies, it is highly possible that you will be exposed to risks that are related to foreign exchange.
One of the major advantages that are related to trading CFDs is the ability to access affordable and greater chances of exposure to an increasing index. They actually offer the possibility of exposing you to companies and industries that could possibly outdo the broader index in terms of performance. Instead of having to acquire the whole market, you can use CFDs to select specific sectors.
Having a predetermined percentage risk and utilizing a trading plan or optionally a third party’s trading strategy will ensure that you are successful when trading CFDs. Taking up long position using leverage could land you into problems and you will be greatly affected if the position does not go your way. Your decision therefore should be quite simple but strategic at the same time. For instance, you might have had the feeling that the market will rise by 10% over a period of six months. You have put a stop loss if it falls before that time. It falls 5%, and so without any further hesitation you decide to sell and move on.
When trading shorts, the time frame must greatly be put into consideration. Longer trades that last longer than three months should always be carefully scrutinized especially from a financial perspective.
Generally, to successfully trade CFDs, a wide range of knowledge on all the technical indicators should be at hand. Additionally, a broad understanding of price action is also essential. Trends should be carefully observed as well as looking out for highs and the lows too. A good and proper comprehension of a company is quite important as this will enable you to relate well with the technical indicators. This is actually a very good spot to be as a trader as you will be able to experience better ease when trading.