How To Get Started CFD Trading
This step by step guide will show you how to start trading CFDs. Which CFD provider should I trade with, how do I choose a suitable CFD provider?
It can be very intimidating when you are trying to choose the right CFD trading company. Many important questions need to be answered. These include what do I want in a CFD trading platform or what type of service am I after?
Firstly identify the oldest and most recognised CFD providers, research their history and any articles you can find about them. Because of the leverage aspect of CFD trading it is important to trade with a secure provider.
Make a shortlist of the most suitable CFD providers, and then read more about their products and services via their websites. Be thorough and focus on points that will affect your trading experience, this includes costs and range of markets.
It is also important to make sure you will be comfortable using their trading platform. Check whether the trading platform they offer is browser-based or downloadable. Browser-based platforms tend to more popular for the on-the-go trader as you can login to check your CFD positions via any internet connection.
Trial accounts are very common among most CFD companies, these can be very useful as they give you the opportunity to test out their platform and the products and services that go with it. Spend time getting to know the different areas and markets you would use while trading. A trading platform you are comfortable with is very important in building your foundation as a CFD trader.
It is also important to understand the type of risk management tools each CFD provider offers. As CFDs are a margined trading instruments, meaning you can lose more than your initial deposit, it is important you utilise risk management methods to protect your trading capital.
After concluding your research you can now decide which CFD provider you will sign up with
How do I apply for a CFD trading account?
All major CFD providers offer quick and easy online application processes, just visit their website and follow the instructions step by step.
Every CFD provider should offer a variety of different account types for you to choose from. Do some research and choose the one the most suits your trading and risk management needs.
My CFD account is active, what now?
Once your CFD trading account has been approved and you have obtained your login details, simply login and fund your new CFD account. This will allow you to start trading immediately. After you have funds on your account you are free to enter the market. If your CFD providers’ platform is browser-based, login via the website, select the market you wish to trade and take a position. .
{Conclusion}
The right CFD provider for you is the one the provides the service and platform the suits your trading requirements.
Make sure the CFD provider offers a whole host of risk management tools including guaranteed stops of protect your trading capital.
A recognised and secure CFD trading company is IG Markets, Australia’s Number 1 CFD Provider*. They offer a huge range of markets, free education and market analysis resources and a demo account to get you started.
{* Largest provider by primary account among current CFD traders, Investment Trends June 2009 CFD Report}
Remember that CFDs are a leveraged product and can result in losses that exceed your initial deposit. CFD trading may not be suitable for everyone, so please ensure that you fully understand the risks involved.
Five Easy Steps To Choosing A CFD Trading Platform
With CFDs (Contracts For Difference) gaining in popularity and in press coverage, here’s a useful guide to help you choose the CFD provider that is right for you.
As a general rule of thumb – and this may seem obvious – it really does pay to choose an established CFD provider, one that has been around for a while and is still successful.
{DMA or Market Maker?}
In the long-term you’ll find that it’s useful to have access to both DMA (Direct Market Access) and market maker. With DMA you can trade shares at the underlying market price. And also trade within the market spread.
Market maker platforms offer you access to the whole range of financial markets from forex, commodities to shares and indices.
Education
If you’re relatively new to CFD trading it’s important to choose a provider who offers an educational programme to help you get started.
Competitive spreads & margins
It’s good to shop around and find which provider offers the tightest spreads and the lowest deposits. It’s not the only thing you should consider though.
{Risk Management tools}
While assessing providers take a look at the kind of tools they provide to help you manage your risk. Guaranteed stops offer complete protection from any market ‘slippage’ while trailing stops can help you maximise profits safely. More important perhaps is you should always remember that as a trader it is your ultimate responsibility to manage your own risk.
Try A Demo Before You Decide.
One of the most important steps is to test-drive the technology and the ease of use of the platform with a trading demo account.
When you’re testing a demo account take a look at the following.
Platform performance
Trading is cyclical, during low volatility times the majority of platforms perform well. However, during a ‘perfect storm’ – think back to the recent general election in the UK and problems in the eurozone combining – the impulse to trade is so strong and this leads to periods of high volatility. And these are the times you will be grateful for a reliable and robust trading platform.
Trading Charts
Find out if they have simplified charts that’ll help you get a snap-shot of what’s going on and more advanced charts which you can use for a more studied approach.
Market insights
Does the trading practice account give you access to resources and information about the financial markets which will help you make better trading decisions? Another thing to lookout for in a trading practice account is the ease-of-use. We’re all different so it’s good to get a platform that’ll suit you.
To make a really informed choice you’ll have to be prepared to put some hard work in, talk to the companies and do your research among the trading communities online.
Please note also that while trading CFDs can result in magnified profits, losses too can exceed your initial deposit, so always make sure you fully understand the risks involved in any trade.
Tough Times For The Pound - Forex CFD Trading Explained
Contracts For Difference (CFDs) are becoming an increasingly popular addition to many traders’ portfolios. One of the reasons for this is because CFDs are margined products, which means you pay a small initial deposit (margin) and that allows you to take a larger position than you would be able to in say traditional forex trading.
Trading CFDs can help you profit from falling (going short) and rising (going long) markets.
A CFD is an agreement to exchange the difference in value of a share at the time it is opened and at the time at which it is closed. The amount of money you make, or lose, is determined by the amount of contracts you hold multiplied by the difference in price at which you opened and the price at which you closed. The range of markets you can trade CFDs on is extensive, from forex to shares to indices.
Let’s take a look at forex and a recent example.
Forex trading
Forex trading, or currency trading is the most popular and accessible market to trade on in the world.
The premise of forex trading is simple, you ‘buy’ if you think the first-named currency in any quoted pair is going to strengthen against the second currency. And sell if you think it likely to weaken. The sheer amount of volume of trading that happens on the forex markets means that they are the most sensitive to changes in market sentiment in the world.
The actual fear of what might happened sometimes has a greater influence than the actual event itself.
An example of this would be:.
GBP/USD
On Monday May 10 the pound started the day relatively strong against the dollar, but the day would turn into one of the most turbulent days in British political history. Analysts concluded that, against the back drop of political turmoil a couple of events had bolstered the pound.
The $975 billion support package agreed by the EU and the IMF to ensure that the troubles in Greece wouldn’t spread throughout the eurozone had a positive affect on the pound. So too the Bank of England’s decision to keep the key interest rate and the quantitative easing programme as they are.
The latter would have calmed traders, reminding them that not all key monetary policy decisions in the UK are decided by the government.
At one point the rising pound was worth $1.502. However, when we reached the halfway point of the US trading day, the British PM Gordon Brown announced his willingness to step down as leader of the Labour party. Certain commentators argued that this was evidence that a pact between Labour and the Liberal Democrats was becoming a distinct possibility, and many not only fear that such a coalition would be short-lived but also that the tough measures that are required to cut the UK’s budget deficit would not be carried out.
What most people agreed on was that the process of getting a working government in the UK was becoming increasingly protracted.Sterling would fall back to trade around $1.485 as currency traders voted with their fears. It will be interesting to watch what happens to sterling and the UK as the political landscape continues to shift around.
Remember that CFDs are a leveraged product and can result in losses that exceed your initial deposit. Trading CFDs may not be suitable for everyone, so please ensure that you fully understand the risks involved.
Implementing A CFD Trading Plan To Become A Successful Trader
If you plan on being a successful trader in the long term then you need to develop a CFD (www.igmarkets.com.au) trading plan.
What to Trade
The first step in implementing your CFD trading plan is to determine what instrument you are going to trade. The flexibility of CFD trading allows you to choose from a plethora of instruments including thousands of global shares, stock indices, commodities and more, you can even trade margined forex.
Entry Point
How you are going to enter the market is the most important question once you have decide what CFD you are going to trade. The use of analysis tools is very effective in providing this, these include indicators, Japanese Candle Stick Patterns, Patterns, Swing trading. These tools can be used when trading CFDs both long and short.
You should place your CFD position when all of the signals are met. Be sure to place your trade in the trending direction. CFD trading offers a huge variety of Risk Management tools to help limit the liability on each of your CFD positions
At this point money management philosophies like the two percent rule become integral. They help you decide how much of your trading funds will be risked on this CFD trade.
During your CFD trade
Amend the stop at the first opportunity so that your position breaks even. You should never add capital to a losing position, but if the trade becomes profitable adding additional funds is a good way to maximise profits.
Exiting your CFD position
The correct point to exit a CFD trade is a problem that every trader will encounter. When all of you initial goals are met it is time to close the trade.
E.g. You should exit your trade when you reach your target price for the position or if you reach your profit ratio (3/1) goal. Now that you have completed your CFD trading plan you must enter the market and put it into practice.
Remember that CFDs are a leveraged product and can result in losses that exceed your initial deposit. Trading CFDs may not be suitable for everyone, so please ensure that you fully understand the risks involved.
Three Golden Rules You Should Know Before Trading CFDs
This is a quick guide designed to help you get up-and-running as quickly as possible if you intend to start trading CFDs (contracts for difference). A CFD is an agreement to exchange the difference in value of a financial instrument between the time at which it is opened and the time at which it is closed. You trade CFDs on margin so you will not have to pay the full value of the underlying financial instrument you just pay a small deposit which gives you leverage of up to 20 times your initial outlay.
It’s important to start trading CFDs with the right attitude, as although trading on margin means that profits are magnified, it also means that losses are too.
Point One: Managing Your Risk
In order to make a long-term success of CFD trading it’s important you make risk management part of your strategy from the start. That is part of the reason why they are successful and remain successful. It’s about getting the basics right from the start.
Placing stops and limits on your trade is very important. When you start, make sure that for every trade you place you calculate how much you can afford to lose and place a stop at the exact position in the market where you would exceed that amount. If you place a guaranteed stop, your trade will be guaranteed to stop at that point, even if the market suddenly moves against you. Always watch any open trades you have very closely.
Point Two: Find The Most Suitable Provider
If you’re new to CFD trading one criteria you can use to judge if a CFD provider is going to work well for you in the future is whether they offer an educational programme to help you get started. It’s therefore important you choose a provider who can offer you educational resources to get you started. Looking beyond the educational factor, what kind of resources do they provide to help you grow and improve as a trader??
Another thing to consider is find CFD provider that has a good reputation within the industry. Always be wary of CFD providers who offer ‘free’ sums of money if you sign up with them. Ask an experienced CFD trader what is the single most important thing they look for in a CFD provider and they will say something like:
Rule Number Three: Make Sure The Trading Platform Is Right For You
It really is key to choose a reliable and robust trading platform. If it is browser-based make sure you’ve got the very latest version of the browser they recommend that’s usually either Internet Explorer, Firefox or Chrome.
If you’re in a doubt, find a CFD trading forum and post a question, you’ll get lots of people giving you their opinion and then try and find the consensus view. Some trading platforms only offer the ability to make trades and very little else, look for one which, as you get more experienced, will provide you with all the tools you’ll need to remain a successful trader. The kind of things you should look out for are access to expert research and market analysis and financial market news feeds. The last point to remember is that the CFD provider can only do so much, make it your mission to learn as much as possible about the financial markets and what makes them tick.
Start with one market, say shares, and learn what sort of events will affect a company’s share price. A good place to start your search for a CFD provider is with IG Markets, which is the UK’s leading CFD trading provider. They offer an extensive range of research resources, expert market analysis and commentary to help you increase your CFD trading knowledge, and they have online CFD seminars. They also offer professional-level charting software through their PureDeal platform.
It is important to note that shares CFD trading can result in losses that exceed your initial deposit, so please make sure you understand the risks involved.
The Real Secrets of Long Term Trading Success
We’re all human: if we think we can do something in half the time and get the same results we generally do it. And we’ll do this even though we know at some level that we are due for a fall if we do.
If someone lets you know about a surefire way to make money on the financial markets without having to put much effort in, we all, generally, go along with this and get involved.
Certainly there are lots of books out there that talk about how best to make money on the financial markets. There are also websites with free expert financial market analysis.
Whether it’s a new course promoting another new method or some new software that will almost automatically make you richer.
Learn, Learn and then Learn some more
There is no substitute for deep knowledge of the financial markets, it’ll take some time but it will be worth it in the long run. Financial markets are influenced by a multitude of factors. Politics can have an influence, this could be as simple as a change in leadership or a full scale global political scandal.
You don’t have to be an expert, just try to increase your general political knowledge. The global and local economic situation will have a bearing on the financial markets too. it’s important you understand the key measures of a country’s economic health, from GDP figures to unemployment figures.
The global economic calendar is a busy one with which sees country’s releasing economic figures at regular intervals. It’s important to make sure you know the dates of these announcements so that you can measure media reaction and see how the markets react. While you will find many free resources on the web, it’s worth subscribing to the key economic, political and financial newspapers and publications in your respective country.
It’s a good idea to choose one market and try and learn as much as possible about it.
Forex
The foreign exchange (forex) market is the largest financial market in the world. {Its prominence perhaps lies in its broad appeal and the number and diversity of participants it attracts; from the world’s heavyweight commercial banks, hedge fund managers, right down to the individual. The forex market is appealing because of its liquidity and the sheer amount of money that is regularly traded}. Choose a currency pair which is, historically, less volatile than others and learn everything you can about the relationship between these two currencies and indeed countries.
Shares
A number of factors can affect the price of a company’s shares. While the underlying economic climate plays a significant role, it’s vitally important you know how to asses the financial health of a company.
Companies listed on the London stock exchange will release financial results twice a year and trading updates twice a year too. These will give you valuable insights into how well a company is performing.
It’s also key to gauge any media reaction the media reaction and whether they were more or less what economic analysts were expecting. Start with a company that’s share price isn’t particularly volatile, that way even though your profits won’t be massive, your losses won’t be either.
Commodities
All commodities have a unique weighting of factors which will influence its price. There is a lot of information about trading commodities available on the web.
But it is the extent to which these factors influence an individual commodity that investors and analysts pay special attention to.
For instance, the price of Gold and the US dollar are very closely linked, as many investors use the relative stability of the former to hedge against a weakness in the price of the latter.
The price of platinum tends to rise in more stable economic times due to its specialist use in manufacturing.
It’s a good idea to start with a commodity that’s price is stable.
To summarise then
As you have seen, whichever market you pick it’s a good idea to choose financial instruments that are traditionally less volatile than others.
Never underestimate the importance of risk management.
Successful CFD traders make risk management an integral part of their trading strategy. This is one of the reasons why they are successful long-term.
One final point, before you put up any of your hard earned money gain some actual, physical experience of trading by using virtual simulators or demo versions of platforms.
One place you can try to start taking advantage of the financial markets is CFD trading with IG Markets. They offer a free demo of their trading platform and free education and resources to help you become a better trader.