CFD Trading Tips

CFD Trading Tips


You cannot be a successful without risk management and discipline.

 

What to Trade CFD Trading Tips

If you’re new to trading, then you are highly likely to lose the money you have in your trading account for many reasons, you should consider this money your intuition fee and not to start dreaming of large balances, fast cars and holidays.

New traders should definitely stay away from intraday trading using Forex, Indices, commodities etc, they are pitched at you as the perfect product to trade, massive leverage, low cost, trade day or night etc. Intraday and massive leverage are not your new friends, remember this, that in most cases if you lose money your CFD Provider takes your loss as it's win. That should be food for thought to sharpen up your game!


TakeAway – new traders should not trade intraday with massive leverage

So what’s the easiest thing to trade?
Well in my own humble opinion, is trading shares CFDs or stocks, not intraday but end of day, looking for daily weekly trends that will deliver you the better Risk Vs Reward scenario.

Share CFDs are less leverage Blue chip stocks are 5 – 10% margin deposit and not 1/1500 etc with FX.

So trend trading shares should be step one, followed by share CFDs with some leverage.
But before you even start trading shares or CFDs you need to understand how all the numbers work, so
check out this page CFD Money Management In a nut shell you can only risk 1% of your capital per trade including costs. So a minimal starting account would be 15K and 1% is $150 (brokerage in/out $20) so $130 is the dollar risk. Now how many share cfds you can buy with $130 will depend on the Margin Deposit 5 – 50% and secondly the Entry Price Vs the Stop Loss Price (tradinglounge has a calculator to work this out) Note: if you start risking 2,3,5,10% per trade you’re Not going to make it. (Please note the 1% is for accounts under 30K, above this the % needs to diminish)
You will find that the 80/20 principle is quite accurate in working out your results, it’s only a rule of thumb, but it works like this; Out of say 10 trades you win 5 and lose 5 (50/50) in fact if you can maintain 50/50 consistently your doing well. So the 5 loosing trades will be 5% of your capital. Now the 5 wining trades wont all be fantastic trades, some will trend well other may break even or have small profits, so about 2 of your 5 winning trades should run (If you have a trading method that allows profits to run) So in a nut shell you will make most of your money from 2 of your trades, so 2 out of 10 the 20/80 principle.


TakeAway – Use shares with a 1% risk per trade

 

How to Trade

Ok, we are now trading shares or share CFDs and are looking for trends for the better risk vs reward.
When you take a closer look at trends on a daily chart you can start to see that markets tend to move higher or lower for certain periods, 3 or 4 days without breach the previous daily low or 7 to 9 days – these are rarer. So short term strategies would be confined to the 3 -4 day trends and if you get a 7 – 9 day trend then that’s a bonus. You can see some of our Mechanical trading strategies here for free CFD Trading Strategies

Next is trend trading so we are looking for trends – you will normally find a market is moving from one large number to the next large number of the same degree (see Trading- levels concept) We use the TradingLevels concept with Volume Analysis and Elliott Wave these are the three tools we use as technical analysis to help define a trend. Of course there are other methods, but you need to find one to suit your personality, but it is the trend you’re now looking for.


TakeAway – What analysis tools will I use to define a trend?

Standing in the dusty street at high noon with guns ready to be drawn!

Trade Set-Up, Trade Trigger, Initial Stop, Trailing Stop, First Target and Final Profit Targets

These are the basic elements you need to gain wisdom on, do not take them for granted, the more time and detail you can apply here the better trader you’re going to be.
From my style of trading, as mentioned above the TradingLevels Elliott wave and volume will also be used as part of the trade set-up – I will use probability to move in a certain direction of taking action but I will only move forward based off Evidence, I require all the Evidence to be in place before placing a pending trade that waits for the price to trigger to entry and setting the initial stop.

Money is the new God and even if you’re not religious, once your money enters the market and the market starts to go up and down, you will emotionally go with it, the game of happiness and sorrow is in play – if you don’t have and can’t stick to your plan the happiness sorrow game will win, as you can’t make rational and practical decisions while your emotional.  If this becomes a problem for you then use a Mechanical trading strategy and not free styling your technical analysis


TakeAway – Only move on Evidence. If it’s all too emotional, try a Mechanical trading strategy.



 

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GRAND SUPERCYCLE

With the Trend    (I)  (II)  (III)  (IV)  (V)
Against the Trend ( A )  ( B )  ( C )

SUPERCYCLE
With the Trend      I)  II)  III)  IV)  V)
Against the Trend    A)  B)  C)

CYCLE
With the Trend   I   II   III   IV   V
Against the Trend   A  B  C

PRIMARY
With the Trend    (1)  (2)  (3)  (4)  (5)
Against the Trend    (A)  (B)  (C)

INTERMEDIATE
With the Trend    1)  2)  3)  4)  5)
Against the Trend   A)  B)  C)

MINOR
With the Trend     1   2   3   4   5
Against the Trend    A  B  C

MINUTE
With the Trend   (i)  (ii)  (iii)  (iv)  (iv)
Against the Trend    (a)  (b)  (c)

MINUETTE
With the Trend   i)  ii)  iii)  iv)  v)
Against the Trend   a)  b)  c)

SUBMINUETTE
With the Trend   i   ii   iii   iv   v
Against the Trend    a  b  c

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