By far the most common query asked among budding CFD traders is ‘what are the most useful CFD day trading investing strategies or even the best winning CFD trading strategies that the profitable CFD traders use?’
Here we’ll look at the top 5 reasons why day traders choose to trade a contract for difference over other derivative products and find out the most popular CFD day trading investing strategies.
1. No overnight financing
CFDs have definitely become the best choice for short term day traders and you will find a few key causes of this. Firstly, CFDs incur a financing rate when you hold a position overnight. The financing for lengthy positions is commonly the RBA rate (cash rate) +2%. So if the RBA minute rates are 7% you then pay 9% a year calculated back as a day rate. A great way to avoid that is to seal your position 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 because of the truly great leverage you receive entry to. The thing is that, should you have $5,000 in the stock options trading account then you can certainly only trade $5,000 plus a 5% go forward $5,000 is just $250.
Should you took that very same $5,000 on CFDs and traded a $20,000 position, that same 5% move now compatible $1,000. So that you can potentially make another $750 with no more effort. Also keep in mind you are able to lose an additional $750 without having more effort at the same time!
3. CFD liquidity on top 100 ASX stocks is solid
The main factor for short term day traders is a highly liquid market and unlike other derivative items like options, CFDs mirror the liquidity with the underlying stock exchange. When trading utilizing a Direct Market Access (DMA) provider you can get use of and will see the exact volume available on each stock at muliple numbers of depth.
CFD day traders need high volume stocks plus a transparent market depth book that can 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
Certainly the biggest highlight for CFD day traders will be the really low commission rates. Actually probably the most popular CFD merchandise is the index CFDs which can be commission free. Thus giving you access to an easy moving product with ample liquidity for zero brokerage.
Even if you are daytrading the top 100 CFDs, the brokerage is still very low. Many CFD brokers australia wide charge at the very least $10 or 0.1% this also keeps your day traders very happy.
5. Day Traders love volatility which as been higher than normal recently.
Volatility and CFD trading are the perfect couple. Day traders can not afford to sit there watching a regular go nowhere, they really want movement and fast movement. If the markets are volatile, short-run day traders will be in their element and often profiting handsomly in the short sharp intraday movements.
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