How to go about starting online CFD trading
Conducting online CFD trading can be considered as one of the best and brilliant ideas that have ever been conceived. This way you will be able to make use of your personal computer and high speed internet that is available almost everywhere. It is quite easy to start a CFD trading business with this resulting in numerous benefits unlike when compared to other business ventures or income sources.
In online CFD trading, you will not require to hire any employees. In addition to this, there is no payment of lease for an office space, no inventory and no absolute dependence on customers who are not reliable. In the CFD markets there is competition from other traders which is actually healthy if the markets are to thrive at all. Discussed below are the steps that are involved in starting up online CFD trading.
As much as possible, the computer will need to be of as high quality as possible. In fact, you will realize that nowadays, many CFD providers do have mobile trading applications which actually reduce the need for a computer in the long run. The speed of the internet will have to be high as well. Due to the rapid changes that occur on CFD prices, speeds of up to 1.5Mb per second or even faster, are highly preferred. Slippage usually occurs when there is a delay in the time n order is sent and the time it is executed, which may result in serious consequences to the trader.
The other requirement for this business venture is risk capital. This amount may vary from one provider to another although it is not quite huge. In any business venture anyway, capital is the major requirement most of the time.
The next requirement and one that is pretty much essential is a trading platform which is basically software. You can buy this although most CFD providers usually make some freely available ones for trial purposes, hoping that they will eventually make a kill when they are finally bought and hence earn some money.
Next, you will need to engage the CFD broker. Generally there are two types; the market Maker and the Direct Market Access (DMA). The former takes the opposite position to a client in a CFD transaction while the latter matches the order from the client with a counter order from another CFD funding source or DMA provider.
When electing a CFD broker it is essential that you do so with a lot of caution. Where possible, conduct your own independent research before you decide on whom to work with. You must never take lightly the competition for a client is which is usually quite intense. You will also require a trading plan before you can start running an online CFD trading business. This plan is also known as CFD trading strategies.
An important fact that should be comprehended is that CFD price moves in three different directions: up, down or horizontally. It is important to have at least two different strategies that will be applicable to each of the situations. You should note that CFD prices spend at least 20% of the time shifting in an upward or downward direction, 80% of the time moving horizontally; the reason as to why two strategies are required. If the market trend is high, you need to buy and it is down, sell. In the case of horizontal or sideway move, it is advised that you avoid any trading until a trend that is new come up. This is because there is very little opportunity for profit making.
In instance where the trend is shifting sideways, the other strategy would be to sell at a level where the prices seem not to be moving up and to buy at a level that has hindered them from heading to a lower level. Just a little bit of experience and intuition to be able to make accurate assessment on the resistance levels is quite important.
The two basic strategies are quite easy to initiate as they don’t need any special education to understand them. As a matter of fact, the skills that are needed are just the Same ones that are applied in the normal day to day life. It is however advised that a CFD trading strategy is prepared way in advance and stuck to accordingly.
CFD online trading is a brilliant way of creating a source of income. However, these markets have to be approached with a lot of caution to ensure you last long as a trader in CFD.