Understanding the perfect way to place an order in CFD trading allows you to take advantage of its benefits and maximize profits. Trading CFD allows you to trade multiple instruments in one trading platform. It is open 24 hours a day and depending on the strategy you use, you most likely find a good trading opportunity and profit from it. Since you will just be paying a portion of the entire amount, it is perfect for new traders who are still trying to get along with the market.
Things To Do When Trading CFDs
Choose The Market
There are thousands of markets that you can choose from in CFD. From Bonds, Commodities, Indices, Shares, and Forex, choose any of these markets and take advantage of its price movement without owning the underlying asset and paying the full amount to speculate. Retail traders are also given the chance to get exposed to the world’s tradable markets throughout New Zealand, Australis, Asia, Europe, US, and the United Kingdom.
Since you are being offered numerous instruments, it is wise to utilize certain research tools which can be found in the trading platform for you to quickly find possible trading opportunities.
Go Long (Buy) or Go Short (Sell)
After choosing a market, it is time to know more about the current price. The price of the underlying asset is similar to the price of the CFD. The 1st price quote is known as the bid or sell price while the second one is the offer or the buy price. Spread is the difference between these two and you or the broker has to pay it at the end of the trade.
You can go long if you think that the market price will rise and go short will the market will fall. This decision is all on you. Therefore, you have to be knowledgeable about certain factors that may affect the market prices because it is crucial to your decision-making.
Selecting the Trade Size
A trader is allowed to choose the number of CFDs that he wishes to trade. For equity traders, the equivalent of 1 CFD is 1 share. As for interest rates, bonds, commodities, indices, and Forex, the value of CFD depends on the trading instrument. The value of CFD can be found when you go to the market information sheet in your trading platform.
Adding of Stop Orders and Limit Orders
Before placing an order in CFD Trading, you have to protect your trading account and you can do so by incorporating a risk management strategy. One of the basic risk management tools is the stop-loss order. This tool automatically closes when a certain level has been reached, protecting your account from huge losses. You cannot say that stop-loss prevents your account from having losses because losses are common in trading. But with stop loss, you won’t suffer from huge losses that could endanger your account. Stop loss will provide protection and lower your risks. Therefore, it is important to use risk management tools and make a comprehensive trading plan.
