The contract for Differences (CFD) is like any other traditional asset-based investment that offers all sorts of plans, aims, rewards, and risk ratios. But then CFD trading is known to be a derivative-based market wherein you can sell and buy contracts made between investors and CFD providers.
CFD enables market investors to take risks on the rising and falling of the financial market without owning an underlying asset. Assets acquired through CFD are leveraged, making it totally possible to increase your market exposure whilst maintaining only a percentage of the entire financial instrument.
Another good thing about CFD is that they offer a huge variety of products which include Index CFDs, individual share CFDs, Forex CFDs, Cryptocurrency CFDs, Commodity CFDs and so much more.
This strategy aims to venture minor movements of prices in the market. Short-term trading can go on for a few minutes to several days, depending on the strategy that you want to employ. As for long-term trading strategy, it can take months to years. Whether you go for a short term or long-term trading plan, you must make sure to have a risk management plan that will help you attain continuous success in trading.
As for short-term trading, there are three types to choose from – Scalping, Day Trading, and Swing Trading.
Scalping or putting short but multiple trades is very famous among new traders. It aims to take on small profits out of small price movements of the financial market. This kind of strategy mostly gets exited shortly after you get some profit. Though there are trades that are placed randomly throughout the day, it is still very important to watch out on the movement of the economic calendar.
One very popular method used in the scalping market is the combination moves of averages as well as the stochastics oscillator found in the M5 chart. They are mostly used as major currency pairs. In this method, a 200-period exponential moving average (EMA) is being applied together with the stochastics oscillator with the standard settings. You use this 200-period EMA to define whether the market is trending or not.
The typical activity in a Day Trading is liquidating position right before the trade closes. However, for favorable market conditions, some traders tend to hold on to the position overnight. Just like in scalping, day trading is all about technical analysis which is the basis for these trading decisions.
Traders can apply technical tools that can add weight to the trade. These tools include Japanese candlestick patterns, the support/resistance are and the Fibonacci studies. Despite that, always remember that simple trading strategies are the ones that generate returns, complex ones can somehow cloud the views and ideas of a trader.
This CFD trading strategy is more of exploiting gains from short-term swings. Most of the time, swing trading takes on for days up to a couple of weeks. The only difference between day trading and swing trading is its approach.