Choosing the right CFD trading strategy for your needs is a vital step in increasing your potential for maximising profits. The choice of strategy largely depends on your objectives, tolerance for risk, and expertise. In this article, we’ll touch on some of the most popular CFD trading strategies and how to select one that best suits your needs.
Popular trading strategies
There are a variety of trading strategies that exist for a trader to choose from.
- Scalping: is a short-term trading strategy by which a trader attempts to profit from small price fluctuations. A scalper enters into a large volume of trades frequently throughout a trading day, and holds onto positions for a very short period of time (seconds or minutes). Scalping can be highly stressful and time consuming so requires someone with the ability to handle stress and with lot’s of time on their hands to be successful.
- Day trading: this strategy also sees traders executing a large number of trades in a trading day. Positions may be held for up to a few hours, but like scalpers, day traders also try to make gains from short-term price fluctuations. A day trader needs to be quick on their feet, and have the ability to conduct proper market analysis to achieve more successful trading outcomes.
- Swing trading: is a strategy that sees a trader trying to profit from medium-term price swings. Positions are commonly held for a couple of days to weeks. A swing trader typically relies on technical and fundamental analysis to make trading decisions. This is because the types of trades that they execute are largely impacted by factors like political instability, economic news and events, war, natural disasters, etc.
- Trend trading: this long-term strategy involves identifying directional momentum of the market and then participating in the move. Long and short-term trend trading exists. Long-term strategists may follow the stocks of publicly listed companies. In contrast, short-term strategists tend to focus on asset classes like forex, commodities or indices.
Selecting a CFD trading strategy that best aligns with your needs
As we’ve already mentioned herein, the type of CFD strategy you decide to adopt should be based on the following factors:
Trading objectives
Establish what it is you’re trying to achieve and how quickly you want to achieve it. Are you looking for short-term profits or is your focus on long-term investments? Once you’ve identified your objectives, you’ll then be able to decide what strategy best suits you.
The level of risk you’re willing to incur
Each CFD trading strategy comes with its own level of risk. CFD trading in particular is highly leveraged, increasing risk exponentially. Establish where you’re at with the type of risk you’re willing to take on, and how much of your own money you’re willing to lose. This will help make the decision of choosing a CFD strategy that much easier.
How much time you have available
It’s clear that some CFD trading strategies are far more time intensive than others. Be honest with yourself about how much time you have to devote to trading. Once you’ve ascertained this, choose a CFD strategy that can be catered to.
Learning as an ongoing goal
Regardless of the type of CFD strategy you choose, ensure you properly educate yourself on what they each entail. Furthermore, ensure you make learning an ongoing endeavor. The financial markets are constantly evolving and technologies advance. In order to stay ahead of the game, you must engage in learning to properly understand how they work, how they’re changing and how to best succeed. Also make sure you are fully aware of the risks associated with each strategy, especially the one you adopt.
Putting your strategy to the test
One of the best ways to decide what CFD strategy to use is by putting the different strategies to the test. To do this, consider opening a demo trading account with T4Trade. A demo trading account facilitates learning in the most practical manner. It typically simulates a real trading environment in which you can monitor live market conditions. It gives a trader the opportunity to execute different trades based on different strategies and then assess outcomes without putting their own capital at risk. Using virtual funds, you can enter and exit trades and then analyse how they performed. In this way, you’ll get more informed insights into what strategies best work for you, and which offer the most potential for making a profit. Demo trading accounts also help you build the confidence required to move into a live trading. You can boost your skills and gain vital knowledge on crucial topics like technical and fundamental analysis, reading charts, analysing indicators, and so much more.
A note on risk management
As we’ve already mentioned, CFD trading is regarded to be highly risky. Therefore, regardless of the CFD trading strategy you choose, ensure you integrate effective risk management techniques to safeguard your money. Be this stop-loss or take profit orders, ensure you use the tools available to avoid losing all your capital. In addition, ensure you have proper control of your trading psychology. Trading can evoke a wide range of emotions, be this fear on the one hand or greed on the other. Either feeling can have an adverse effect on trading outcomes so be sure to be mindful of your emotive state of mind before making any trading decisions.
Trading with T4Trade
T4Trade is a popular broker that works to help their traders pick the right trading strategy and achieve their objects. They do this through a range of educational tools via their T4Trade Academy. Resources like videos, webinars, LiveTV, economic calendar, podcasts, etc., cover a broad range of trading related topics to help you better understand this space. T4Trade blogs are incredibly informative as well, offering a wealth of ideas, tips, insights and expertise to help you become a better trader. T4Trade traders can access 300+ underlying instruments from 6 asset classes with some of the most competitive conditions. This includes flexible leverage, tight spreads, fast withdrawals and deposits, quick executions, and 24/5 multilingual, top-tier customer support.
All trading involves risk. It is possible to lose all your capital.
DISCLAIMER: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication