An Effective Strategy for Trading CFD?

by peter

 Speculation is a trading technique where a trader either sells or purchases a contract hoping that its value will increase in the near future. In some sources, speculation is also defined as the trader’s decision to involve himself in a risky transaction thinking that he will profit from short term market movements instead of the typical goal of earning money from value addition, return on investment, or dividends. Opposite to the art of trading CFD, trading speculatives started in the late 19th century when traders were no longer physically needed in the conduct of market transactions. Moreover, this trading technique became widely known as the end of 1920 approaches. With the span of time that speculative trading existed, experts can attest that the birth of CFDs were advantageous for speculators (speculator is a term used to define traders who are involved in trading speculations). According to them, CFDs are the most ideal trading material for speculation because of its potential to expose a trader in different trades at lower cost. This is made possible by leveraging. With these explanations, we can therefore say that both Speculative and CFD trading are risky but they are not always disadvantageous to the traders. Here are some tips and situations where a trader can both take advantage of the CFD and Speculatives Trade.

1.Get into the market after a news announcement

It is a must for a speculator to look after breaking news announcements that could play a major role in an asset’s market behaviour. Watch out for business news that contain merging or financial problems because they greatly affect market rates which is very essential inĀ  CFD and Speculations. Keep in mind that it is very important for you to immediately place your positions prior to the change of rate due to a recently announced breaking news. Why? That’s because the tendency of alarming breaking news in the market leads to a sudden surge of rates which make it impossible for you to gain profit.

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2. Wait for the new trend to be posted prior to making your positions

 Trends are determined with the help of short term charts. These charts are tools used by speculative traders to confirm or dispel a hypothesis from the primary chart. Trends for this chart usually move at about two to five minutes after announcements such as news, company reports,economic data, index addition or deletion and expected movements are priced in. Thus, it is advisable that traders short check the chart in one to two minutes after the earliest predetermining announcement. Never place your positions prior to the release of the latest trend because this will only lead to the use of stop losses due to early reversals and prices.

3. Utilize Entry Orders prior to News Announcements

Master the art of predicting possible business news stories by analyzing recently published announcements. With this strategy, you are able to go to the market and place your positions before the actual change of rates in the market. Such action can both move favorable and unfavorable to the trader. This favors the trader in the sense that one can freely choose a rate upon the doing a transaction. The disadvantage can however happen when the market rates erratically moves as an effect of a hot business issue.

Conclusion

It is a fact that being involved in trading CFD and Speculative pose great financial risks.Because of this, some careful traders stick to the traditional trading strategies and avoid dealing with these financial instruments.Speculators on the other hand hold unto the idea that losses naturally happen in trading so there is probably no harm when you try to accept the challenge of facing it to defeat it.

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