CFD trading is one of the top ways that people, using Olsson Capital for their trading experience, are making money. That’s not to say it is easy – there are learning and training involved to get the best strategies in place. To make the most of contract for difference (CFD) trading, you need to learn at least some of the basic strategies that have proven successful.
Building A Strategy
There are different ways to build your strategies. You can learn from another, more experienced trader or you can use online resources to help you expand your knowledge. Technical analysis is also very important, particularly in day trading and short-term trading, and learning to understand and evaluate this data is the key to success in CFD trading.
For some, CFD trading strategies are similar to those used when trading on the stock market. But, there are advantages to CFDs over stocks – mostly that you can trade on margin. It means you can profit from upward and downward price changes, depending on how you trade, meaning there are more trades available.
Going For The Short Position
Learning terminology and strategies go hand in hand and that’s why there are a lot of Educational Resources available. One of the first to learn is the concept of the short position and the long position. The purchase of an asset is normally known as the long position and this is where you buy with the expectation that the asset will gain value over time.
On the other hand, the short position is where you sell an asset at a certain price with the intention of buying it back at a later date. It is because you think that the value of the asset will fall over a set time. If you are wrong, then the trade can build losses equal to the difference between the opening and closing prices. So, learning the short position and long position is one of the first CFD strategies to master.
Swing And Hedge Trading
Swing trading can be a good way to either increase profits or, at least, minimize risk. It is where you attempt to make a profit from smaller reversals, known as swings, in larger trends. A bull market, for example, will have periods of consolidation or retracement – this is where it falls below previous high points. The overall momentum is positive, but the periods of retreat could be where you can trade, assuming that things are going to pick up again.
Hedge trading is a more defensive tactic aimed at protecting capital. Hedging traders are already established in open positions and want to protect from lost value. They do this by taking the opposite position in another trade. So if one trade falls, the other will rise and vice versa. This means that the overall position is protected and, while you can’t make any profit, you won’t make a loss.
The final basic strategy to learn about is the short term versus long term timeframe question. Short-term trading is sometimes known as intraday trading and takes place over the course of a day with changes happening from hour to hour or even minute to minute. Short-term trading is great to limit financial costs.
Long-term trading takes place over longer periods and involves a lot higher level of forecasting. You need to understand the trends that affect the market. You can then make CFD trades that let you capture larger price moves over anywhere up to a year – or even longer. Here at Olsson Capital, you can explore all of these strategies to find the ones that work best for you.
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