You may have been wondering whether it is possible for a day trader to trade with CFDs. Well, you will be thrilled to learn that you can. Simply put day trading means the buying and selling of a security in the course of a single trading day.
Day trading is possible in just about every marketplace. However, it is exercised mainly in the forex and stock markets. In CFDs, day trading means that you will not hold your tradition positions beyond one day.
Day traders in HK place lots of CFD trades during a single session. In addition, they pay more attention to the more buoyant markets.
Which is the Best Time for CFD Trading?
There have been varying opinions with regard to the best time for CFD trading. Some traders prefer to sit at the computer all day and browse for trading opportunities. Others would rather take a few minutes in the evening to check their trading portfolios.
Yet other traders will purchase and then put it out of their minds. They will engage a couple of times a week or even less. CFDs favor traders who are serious about their money and making profits. Nevertheless, there is no time that is cut in stone with regard to this style of trading.
Traders must choose timeframes that work for them. If you have a fulltime job, for instance, you may only be able to follow the markets after work. However, you want to follow up on your trading positions regularly.
This means that you may have to take a peek during your coffee or lunch break. Any decisions that you need to make will be made during this time.
Day Trading Strategies
To begin with, you must engage a competent broker with an excellent platform. Secondly, you will be spending a lot more time on your PC. It is actually quite easy to develop an effective day trading strategy for CFD trading.
By now you know that CFDs are about the difference between the entry of a trade and the exit. Some of the strategies you need to think about include the following:
1. Consider the Regional Differences
Markets in different regions come with their own set of challenges. The day trading strategies in one country may fall flat when applied in another. In addition, you have to factor in regulations in each particular region.
Therefore, before you take the leap, browse the internet for any ambiguous regulations that may impact on your trading strategy.
In addition, different countries may present different tax hurdles to jump over. You also need to check these out. Find out information such as:
- The type of tax you will be expected to pay
- Where it is to be paid: overseas or locally
- Marginal dissimilarities that may have an effect on your profits
2. Risk Management
Use Stop-Loss
One of the strategies you must employ to manage risk is stop-loss. Without this, you may end up losing more money than you are prepared to or can afford to lose. It is exciting to find that the price is moving in your preferred direction.
However, this can change at any time. A stop-loss helps to control the risk that comes with that change. You will get out of the trade with minimal loss if the asset fails to come through.
Position Size
This is the number of shares that a trader takes on a single trade. To get the right position size, consider the difference between the entry price and stop-loss price. Then find out how many shares you can afford to take on one trade.
Additionally, make sure that there is enough volume of stock to support the position size you use. If the size is too big for that market, you may experience some slackening in your entry and stop-loss prices.
Conclusion
Day trading is perfect for CFDs especially for short-term traders. It presents a variety of benefits to both veteran traders as well as newcomers. Arm yourself with sufficient information and a good broker and you are good to go.