If you are going to start contracts for difference trading, you should be aware of some CFD trading strategies and systems that will significantly improve your chances to do well. So, here are some of the most common CFD strategies you need to have knowledge of before you start trading.
1. Swing trading is focused on avoiding choppy stocks, which are not trending, instead, preferring the ones that are trending up. Next you should go short on down trending phases. The truth is that the time frames of swing trading is as a rule a few days. Needless to say, it is practically not possible to pick the top and bottom of every up and down swing in the market. But it should be added that chart patterns and indicators usage assists to pick entries and exits.
2. The following CFD trading strategy we will talk about are mean reversion systems that are concentrated on the premise that stocks and shares that dip down, have a tendency to bounce back up. The point is that a trader has to to put to the test the systems on prior data of the market that he/ she is going to trade this strategy with. It is also worth for you to bear in mind that it is crucial to pay attention to the win loss ratios, profit loss ratios and the amount of trades that the system triggers. While dealing with during large dips it is critical to be cautious as lots of stocks may be triggered. Basically speaking, mean reversion and they are comparatively simpler to be used than other systems for the reason that they tend to moderately higher win loss ratios.
3. The third strategy you need to be familiar with before you start dealing with CFDs is longer term buy and holds which is a system that can be based on mechanical and fundamental triggers. There is a need to underline that the time frame is typically weeks or even months. This way more room for the stock is provided in order to ride the larger movements. It will be useful for you to find out that there are also systems and strategies that are based on a strongly trending. What’s more, pay attention to that there are interest expenses, with long term positions, but you should comprehend that larger moves compensate for these costs.