The popularity of trading through contracts for difference, known as CFD trading, has steadily grown among Australian traders and investors over the last few years. CFDs provide you the option to trade on price movements in diverse commodities such as shares, gold, oil, currencies, and stocks indices without acquiring the actual securities. They offer amplified access with the ability to trade bullish or bear to make money in both trending and range-bound environment.
For instance, trading as a CFD trader in Australia though basic methods are easy, it is proper to consider mastering the complex one for the better result. This article outlines high impact CFD trading strategies and approaches that you could use while trading CFDs on the different securities in the Australian market.
Advanced CFD Trading Techniques
Let us explore some of the most effective advanced CFD trading techniques that experienced traders use to gain an edge over other investors.
Utilize Technical Analysis
You should make technical analysis the bedrock of strategy if you are trading CFDs in the Australian market. It entails studying of price and chart patterns of past trading where by the trader is able to get the highest chances of making successful trades. Some key technical techniques include:
- Price Action Analysis: Analyze candle arrangements, support and resistance levels, and trend lines to uncover indications which suggest either a reversal is upcoming or a trend will intensify.
- Indicators: It is important to think about using instruments including MACD, RSI, and Bollinger Bands to gather more information about trend development and momentum.
- Chart Patterns: Both recommend trading classic chart patterns such as head and shoulders, triangles as well as flags indicating the possibility of a break out.
Using a combination of different technical tools will help you to time your entries and exits in the Australian CFD market more effectively.
Under Fundamental Analysis
As for timing the trades, technical analysis will help but fundamental analysis is needed to determine what CFD instruments one should use. This encompasses the evaluation of economic figures, events, company earnings and the likes for the measurement of trend of specific markets.
For example, if employment index in Australia rises you would attempt to buy the ASX200 CFD. Gold CFDs can be a good trading prospect when gold prices increase sharply because of increased geopolitical risks in the world, for example. Incorporate into your daily usage as many of the fundamental developments as possible within the technical system.
Use Stops and Limits
Risk management is important in regard to the field of CFD trading. To cut losses always employ such features as stop loss orders, which close the particular trade at certain predetermined levels. We can also use limited orders to ensure we take advantage of our profits whenever our favored target price is met.
For instance, if you are a bulls trader entering a long position in BHP share CFDs at $48, stop loss at $46 and limit order at $52 – this risk and reward is defined for this trade. Both stops and limits are of great help in active CFD markets because they allow for reacting to the respective market conditions quickly.
Trade the News
The issue of trading around history, economic indicators, central bank’s decisions and other news events is quite profitable. Live information that shifts the general perceptive of the market produces a lot of volatility – ideal for short-term trading using CFDs.
For example – trade the RBA interest rate decisions with ‘going long or short’ on the Aussie Dollar some minutes prior to its occurrence. In the same way, place trades before the Federal Budget or GDP numbers to make a large profit in the short-term volatility shifts. The only thing to beware of is that risk-on/risk-off environment means closing positions should be done fast to avoid being on the wrong side.
Use of CFD Platform
Many CFD brokers offer charting packages, trading notifications, different risk management options and much more. Do not miss a chance to get a potential advantage by using the platform tools as much as possible. For example, you can make use of price notification features to receive immediate trade signal on chart levels or events. Stop loss orders which allow automatic trailing of stop loss levels to lock in profits can also turn out to be very helpful in the dynamic nature of Australia’s CFD market.
Money Management
Money management is position size, risk per trade, portfolio and even more. Australian traders are most especially unaware on money management when undertaking CFD trading and they end up over leveraging and with expanded loss.
When you are trading using CFD demo accounts for practicing – consider it as real money so that you develop a good habit of handling your money. Maximum risk per trade must be defined (from 1% to 2% of capital) and more money should not be invested in a single stock. This will keep losses as far as possible while enabling profits to advance at an exponential rate in the future.
Diversify your Trading
Business traders and investors are warned not to put all their money into a single business investment venture. The same applies where this CFD trading on the Australian markets is concerned. Invest across the spectra of forex, indices, and shares to ensure that the resultant risks are not highly correlated to each other.
If all you do for technical trading on the Aussie stock index – the correlated investments will be exposed to group risk or black swan events. By diversifying your trades, you are able to spread them out to several instruments that are not influenced by each other.
Remain Disciplined
Anyone participating in CFD trading should remember that discipline is essential for resisting the temptation to deviate from a trading plan due to emotions that tend to lead to ruin. Avoid trailing loss chaser or when the trades turn bad, some people will move their stop loss aimlessly. It is also important not to overtrade because this means opening several trades at once.
Two major vices for Australian CFD trading should be patience and discipline. Continue to execute your plan (which includes the above approaches) as you do not make irrational moves even when you are on a losing sprees. If the expectancy of the system is positive – then the profits will come after some time.
Bottom Line
Trading through CFDs is especially beneficial in Australia’s growing financial markets. However, the real task comes in using the appropriate approaches and methods when trading on CFDs and at the same time controlling for risk.
Apply such eight advanced CFD techniques discussed to trade Australian CFDs more profitably. Fashion a detailed technical/fundamental trading plan along with a back testing analysis. Take smart risks by using stops, limits and diversification always but stick to trading discipline in executing your trades.
In acquiring these key CFD competencies – you position yourself to trade leveraged products on Australia’s markets as an efficient trader. Therefore, keep on updating your knowledge, skills, and behavior before you exploit CFD opportunities in Australia.
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