The most common question asked among budding CFD traders is ‘what are the best CFD day trading strategies or best winning CFD trading strategies how the profitable CFD traders use?’
Here we’ll go through the top 5 logic behind why day traders choose to trade a contract for difference over other derivative products and identify the most typical CFD daytrading strategies.
1. No overnight financing
CFDs have definitely evolved into the best choice in short term day traders and there are several key reasons for this. Firstly, CFDs get in a financing rate when you hold a job overnight. The financial lending for long positions is typically the RBA rate (cash rate) +2%. So if the RBA minute rates are 7% then you pay 9% a year calculated back being a day rate. A good way to avoid that is to seal your role prior to the trading day is finished, thus avoiding the CFD financing rates.
2. CFD Leverage for day traders is incredible
Another key belief that CFD daytrading strategies are so popular is due to the great leverage you get use of. You see, should you have had $5,000 in a stock trading account you’ll be able to only trade $5,000 along with a 5% move on $5,000 is merely $250.
Should you took that same $5,000 on CFDs and traded a $20,000 position, that very same 5% move now means $1,000. So you can potentially make another $750 without any more effort. Also keep in mind you are able to lose an extra $750 with no more effort also!
3. CFD liquidity on the top 100 ASX stocks is solid
The magic formula for short term day traders is really a highly liquid market and in contrast to other derivative models like options, CFDs mirror the liquidity with the underlying currency markets. When trading utilizing a Direct Market Access (DMA) provider you may get entry to and will begin to see the exact volume available on each stock at muliple numbers of depth.
CFD day traders need high volume stocks and a transparent market depth book that may be relied upon. That’s the reason the DMA CFD providers using WebIress are extremely popular among short term day traders.
4. Low commission rates for CFD traders
By far the most important highlight for CFD day traders is the really low commission rates. In reality probably the most popular CFD merchandise is the index CFDs which can be commission free. Thus giving you usage of an easy moving product with ample liquidity for zero brokerage.
If you live trading the top 100 CFDs, the brokerage continues to be minimal. Many CFD brokers in Australia charge a minimum of $10 or 0.1% and also this keeps the morning traders happy.
5. Day Traders love volatility which as been higher than normal recently.
Volatility and CFD trading will be the perfect couple. Day traders can’t afford by sitting there watching a share go nowhere, they desire movement and fast movement. When the finance industry is volatile, short-term day traders will be in their element and in most cases profiting handsomly from the short sharp intraday movements.
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