Probably the most common question asked among budding CFD traders is ‘what work best CFD trading strategies or the best winning CFD trading strategies how the profitable CFD traders use?’
Here we’ll discuss the top 5 explanations why day traders want to trade an agreement for difference over other derivative products and find out the most frequent CFD trading strategies.
1. No overnight financing
CFDs have definitely turned out to be the best choice for short term day traders and there are a few key reasons for this. Firstly, CFDs get in a financing rate if you hold a situation overnight. The financing for too long positions is typically the RBA rate (cash rate) +2%. So if the RBA rates are 7% you then pay 9% per year calculated back as a day rate. One way to avoid this is to seal your posture ahead of the trading day is over, thus avoiding the CFD financing rates.
2. CFD Leverage for day traders is incredible
Another key believe that CFD daytrading strategies are very popular is due to the fantastic leverage you get entry to. You see, should you have $5,000 inside a stock trading account then you can definitely only trade $5,000 along with a 5% move on $5,000 is only $250.
If you took that very same $5,000 on CFDs and traded a $20,000 position, that same 5% move now equals $1,000. To help you potentially make another $750 without having more effort. Also remember it is possible to lose an extra $750 with no more effort also!
3. CFD liquidity at the top 100 ASX stocks is solid
The magic formula for short term day traders can be a highly liquid market and unlike other derivative items like options, CFDs mirror the liquidity in the underlying stock trading game. When trading using a Direct Market Access (DMA) provider you can get entry to which enable it to start to see the exact volume available on each stock at muliple levels of depth.
CFD day traders need high volume stocks along with a transparent market depth book which can be relied upon. That is why the DMA CFD providers using WebIress are very popular among short-term day traders.
4. Low commission rates for CFD traders
Certainly the biggest highlight for CFD day traders will be the really low commission rates. In fact some of the most popular CFD merchandise is the index CFDs which are commission free. This provides you access to a timely moving product with ample liquidity for zero brokerage.
If you live day trading investing the top 100 CFDs, the brokerage continues to be suprisingly low. Many CFD brokers australia wide charge a minimum of $10 or 0.1% this also keeps the afternoon traders very happy.
5. Day Traders love volatility which as been very high recently.
Volatility and CFD trading include the perfect couple. Day traders can’t afford to sit there watching a regular go nowhere, they really want movement and fast movement. If the markets are volatile, short-term day traders have been in their element and in most cases profiting handsomly through the short sharp intraday movements.
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