Top-3 Most Efficient Strategies That Will Set You Up for Success in Trading
You have spent months learning everything you could find about trading on the Internet, got yourself all the tools and services you might need, saved enough money to start, and set up an online CFD trading account. Does it mean you are all ready to be a trader? Not quite, and here is why.
Relying solely on your instincts and luck might help you make a small, occasional profit, but in the end, it will only result in your losing big. To prevent that, you will need a solid and coherent trading strategy. Don’t know how to design an effective CFD trading plan? Use one of the three ready-made solutions described below!
3 Best CFD Active Trading Strategies for Beginners
Choosing, which of the following strategies to adopt for your CFD trading debut, depends on several considerations such as your trading goals, experience, available funds, and love for risk-taking. Note that you might still need to customize whatever option you pick to make it more compatible with your unique trading needs.
#1 Day Trading
The best-known style of active trading, day trading, involves selling assets within the same day you buy them. Day traders benefit from fluctuations of the asset price that happen between the market opening and closing times. Holding multiple positions open during the day and selling them before the market closes minimizes the risks associated with overnight market volatility and other adverse events.
- Day traders need to design a disciplined and thorough trading plan that will be flexible enough to adjust to rapid movements on the market.
- One should monitor the latest stock market news closely and follow the events that can influence stock behavior.
Also known as spread trading, scalping is one of the quickest and most active CFD strategies. Traders here take advantage of different price gaps that order flows and bid-ask spreads cause. To make a profit using this strategy, you have to buy the asset at its bid price and sell it at the ask price. The difference between the two is your gain.
Scalpers do not usually make large profits per trade. Instead, they concentrate on carrying out as many winning trades during a day as possible, accumulating small gains gradually. The secret to being a thriving scalper is in the ability to recognize a window of opportunity when it appears and respond quickly.
- Have a well-planned exit strategy ready as one big loss can easily cancel out most of the previous small gains.
- To increase the frequency of your trades, opt for more liquid markets, such as forex, futures on currencies, bonds, etc.
- To lower the risk associated with this trading strategy, try to hold your positions for as short a period as possible.
To efficiently utilize the swing trading strategy, traders need to be familiar with the wave theory and learn to identify where a particular stock price is at any given moment. Being able to predict when a price reversal is to happen will let you make profits from buying at the very bottom of the price slump, as well as selling at the very peak, just as the price is about to change its direction.
While this type of trading is not considered long-term, positions here can sometimes remain open for up to ten days. The strategy is best suited for patient and self-disciplined traders who will not make any hasty, irrational decisions as they wait for the trend to play out.
- Do profound research to understand how to analyze the market. Enhance your technical analysis with fundamental analysis to make your predictions more accurate.
- Learn to read daily, 1-hour, 15-minute charts to recognize exact entry, stop loss, or other levels.
- Large-cap stocks are best for swing trading, as they tend to have established chart patterns and promise just the right level of volatility and volume.
What’s Your Strategy?
Before deciding which strategy to employ, carefully consider all the possible advantages and drawbacks of each, explore the risks and costs associated with it, and determine what trading style fits your needs best.
What is your preferred CFD trading strategy? Which of the above tips worked best for you as a beginner trader? Tell us what you think in the comments, and remember to share this post with your friends!