CFD Trading Strategies 2021 | CFD Strategies that work

Start Now Learning about CFD Trading Strategies 2021, all Definition & Explanation and the best Trading tips from experts. Read our guide. | TradeOr

blog-post-image

Intro

CFD trading is a fairly new and popular way to play the markets. Instead of purchasing a financial instrument (stock, currency, or commodity), CFD traders speculate on price differences without owning the underlying asset.

With the right CFD trading strategies in place, you can make money by trading on the difference between an asset’s opening and closing price. Essentially, you are betting on the direction of the market in the short term. To give yourself the best chances, you’ll need to learn some of the most popular CFD strategies.

What are the different strategies you can use?

First off, let’s go back to basics: what is a CFD? According to Investopedia: “A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades. 

How do you trade CFDs with leverage?

All online trading carries some level of risk, and CFD trading is no exception. Most CFD brokers will offer ‘leverage.’ Leverage is a way for traders to increase their upfront capital when they enter the markets, allowing them to make bigger trades.  

 

Say you want to trade CFDs but you have limited capital. In the same way that a lever allows a small force to make big movements, so the money or “leverage” from your broker enables you to take more risk with less capital. This investment approach is also known as “margin trading.” 

News Trading

Trading CFDs requires keeping your finger on the pulse of the markets. This means reading financial analysis reports and any breaking news events that could affect your trades. The idea with news trading is to invest in anticipation of a change in prices due to announcements in the news.  

 

The scalping strategy we talked about earlier goes hand in hand with news trading. The flexibility and low transaction costs of CFDs make them easy to buy and sell quickly using the scalping approach.  

  

Pairs Trading

Another popular CFD trading strategy is pairs trading. Forex traders tend to use pairs trading. Currencies go in pairs, so if you are opening CFDs in the forex market, you will invest in a pair of assets and hope to profit from the change in value.  

 

Hedging

Hedging works like insurance. Companies, hedge fundsand banks all use hedging to reduce risks and safeguard their investments. Hedging works as a CFD trading strategy. For example, you could sell short a CFD to offset the risk of price movements in the purchase of another financial instrument.  

Conclusion

There are tons of other CFD strategies out there – contrarian, momentum trading, and the breakout strategy to name a few. Any of these could be the best CFD trading strategy, depending on the time and capital you have available and your aversion to risk.  

Just as important is your choice of broker. For successful CFD trading, you need to find an online broker you trust. Look for a brokerage platform that offers the leverage you need, has customer support available, and consider the features on offer. Take TradeOr for example. This new platform comes with integrated tools like ChartIQ and TradingView to help you analyze the markets, monitor your trade, and share insights with industry experts. TradeOr offers many options to diversify your trading portfolio, from trading CFDs to Bitcoin. Best of all, it has 24/7 customer support and charges 0% interest!  

 

In conclusion, for success you need to find the best CFD trading strategy that works for you alongside a trustworthy broker.  

Previous Lesson CFD trading | Best CFD trading platform – TradeOR Next Lesson What is price action? | TradeOr