CFD Trading Strategies

CFD trading offers potentially high profits to investors, but the financial markets can be unpredictable and there is always a degree of risk. Experienced traders seek to minimize risk – and maximize profits – by using proven trading strategies.

Trading strategies can look complicated at first glance, but they are based on logical principles and can be easily understood by anybody with a little patience. Opteck’s education center uses a wide range of educational resources to teach traders how to use trading strategies and approach the CFD market in a disciplined and systematic manner.

Learn CFD strategies at Opteck’s education center

The education center is a free online learning center for registered Opteck traders. It was developed by a team of educational professionals, working in conjunction with Opteck’s own trading experts and analysts. Their goal was to make the learning process simple, enjoyable and directly relevant to the 1,000+ assets available as CFDs on the Opteck trading platform. Anybody who is interested in CFD trading or forex is strongly recommended to use the education center before they begin investing. All the courses are modular and cover every aspect of CFD online; from the absolute basics, all the way up to expert level trading and investment.

 

Aim for Long–Term Profits with Trading Strategies

The financial markets (and in particular the forex markets) are inherently volatile and react continually to external events. Asset prices can rise or fall dramatically in value and strong trends can be reversed by a single official announcement, news report or even market rumors. To newcomers, the markets can seem like they are driven by random chaos, but there are frequently underlying patterns to the behavior of assets. It is often possible to predict – at least to an extent – how they will perform. Traders who can anticipate changes to trends and predict how an asset will behave are likely to make long term profits. The only realistic way to achieve this is by using a combination of trading strategies, modified through trial and error, and adjusted to current market conditions.

If you take a random or impulsive approach to the CFD market or your forex trades, you are effectively gambling. Your luck can vary, but you’re unlikely to achieve anything better than a 50% success rate. Most traders who don’t use trading strategies, and an analytical approach to CFD and forex trades, do not come anywhere close to their investment potential. They are lucky to break even before they inevitably lose interest after a few weeks or months of haphazard CFD trading or unsatisfactory forex trades.

 

Key CFD Strategies for Forex Trades

There are several effective trading strategies, some of which have been in use for over half a century. Anybody who is serious about CFD trading should at least be familiar with the best-known strategies. The following basic strategies are good starting points for traders who want to enter the CFD market. They can all be developed and expanded to create advanced strategies to exploit every market condition.

  • Bollinger Bands

    Bollinger Bands is one of the simplest and most powerful trading tools in CFD online. It gives indications when to open a buy position and when to open a sell position. The asset price is displayed as a line on a chart and is shadowed by two other lines; a blue upper band and a red lower band. When the asset price touches the lower band it is recommended to open a buy position. If the asset price converges with the blue upper band it is recommended to open a sell position. Bollinger Bands are probably the best CFD strategy for first-time traders to experiment with.

    CFD Trading Strategies

  • RSI

    The RSI (relative strength indicator) is another simple and effective trading strategy that is suitable for new traders. It measures the relative strengths of the markets, indicating whether the markets are bullish or bearish. The rule of thumb is that when the RSI line rises above the 30 point it is time to open a buy position. When the RSI line pushes down through the 70 point it is time to open a sell position.

    CFD Trading Strategies

  • MACD

    The MACD (moving average convergence divergence) strategy sounds complicated, but is one of the simplest and most widely used strategies in the world of CFD online and forex. It was invented in 1979 and is used to follow trends by means of a chart displaying two moving averages and a histogram. The MACD is more sophisticated than a simple moving averages chart and experienced traders can use it as a tool for implementing more advanced strategies.

    CFD Trading Strategies

  • Fibonacci Target Zones

    The Fibonacci tool identifies the lowest and highest points of a trend (bullish or bearish) during a particular time period. Traders seek to identify how far an asset is likely to retrace after a prolonged move in either direction. The fib lines on the trading chart indicate the likely moves, allowing traders to open either a buy or sell position. The fib lines may also be helpful in determining where to set a stop loss or take profit.

    CFD Trading Strategies

  • ParSAR

    The ParSAR or parabolic SAR is a technical indicator designed to show momentum and predict at what point the momentum will change direction. It is often integrated with the MACD to enhance traders’ ability to spot trading opportunities. One possible drawback is that the ParSAR can be vulnerable to certain market conditions; if an asset experiences a whipsaw effect the ParSAR may send confusing signals.

    Registered traders can get a more detailed explanation of all these and other strategies at the education center. The tutorials and trading films are free and include step by step practical demonstrations and case studies.

    CFD Trading Strategies