How to Succeed in Short Term CFD Trading

CFD trading caters various plans and reward/risk ratios, and aims, just like conventional types of asset-based investments.

 

Yet, CFDs are a market that is derivative-based. This means that you are selling and buying contracts between the CFD provider and you.

 

What is CFD?

 

CFD stands for contract for difference. It is a derived financial tool that lets the participants of the market to venture on the movements of the market without having to own an underlying asset.

 

CFD trading includes buying and selling contracts whereby you will pay and/or receive the difference between the liquidation price and the executed price, wherein the asset remains on the owner’s hands.

 

CFDs are products which are also leveraged, which allows it to make the market exposure rise while only outlining a portion of the full  speculative value of the financial tool.

 

Short Term Trading

 

Short-term strategies in CPD trading goals to exploit minimal movements of prices in the market. Depending on the strategy used, short-term spots differ between a fews minutes to some days. On the other hand, the aim of position trading or long-term trading is to target long term trends, ongoing anywhere from a month to more months, and even years.

 

Regardless whether you’re using a short term or long term trading plan, the vital component to a successful trading remains to be risk management.

 

Generally, there are 3 types of short term trading styles to perform CFD trading, namely: scalpers, and day traders.

 

Scalping

 

This involves multiple trades placed throughout the whole session of trading with short-term intraday focus. The goal of scalping it to regularly scan small revenues from small price movements. Often, trades are shortly exited after becoming lucrative.

 

A lot of trades are placed within the trading session, with signals that are mainly derivative from technical study. Still, it is reasonable to focus on the economic calendar since news releases can extremely affect scalp trades.

 

Day Trading

 

Typically, day trading includes liquidating positions before the closing of trades. Yet, some hold placements overnight if the conditions of the market are favorable.

 

Traders, of course, can add weight through additional instruments like resistance/support area, Fibonacci studies and Japanese candlestick patterns. Though, remember that the simple techniques generate income. Being complex clouds the vision which leads to analysis paralysis.

 

Swing Trading

 

This concentrates on exploiting benefits from short term swings. Swing traders aim to capture the price movements between definite highs and lows. Positions in swing trading are typically active between a number of days to a couple of weeks. What makes swing trading different from day trading is the time, and approach, for some.

 

Trading Style

 

Though short term trading is already a trading style itself, subcategories are still in place, like scalping, swing trading and day trading. If you are a trader who likes to be on and off the market, and can only allot 1-2  hours daily, then scalping can be an option for you. On the contrary, swing trading is for those who like holding on to positions overnight and target swings.

 

Bear in mind that successful CFD traders know the category which they fit in and achieve it.