Trading with both Forex and CFDs is, as a process, easy to learn, setting entry and exit positions, stops and so on can in most cases be completed directly from chart screens, however, it takes skill to turn that process into consistent profits.


Trading Instruments

Firstly, we can look at the choice of instruments to trade.
For Forex, this means a currency pair, such as USD/GBP or EURUSD.
There are hundreds available, but for the best balance between volatility, risk and opportunity, there are 6 that most traders look to. These are:



Trading Market

All of these have the liquidity and profit potential to make them attractive.
For CGDs, the choice is wider, from commodities through to stocks via indices, and the precise use of CFDs really depends on personal preference.
Someone with a good understanding of the metals markets would obviously choose those commodities for CFD trading for instance, however
currently, the most commonly traded CFDs are those based on indices, especially the Dow, NYSE and FTSE.



Short Term and Long Term Trading

Trading itself can also differ drastically depending on goals, with day trading providing frequent trades that seek smaller profits per trade,
or longer term, with trades lasting a few days up to two or three weeks, made less frequently but seeking greater profit per trade.
Each approach is a different challenge for traders, with short term trading requiring fast decision making and
maximum concentration, combined with a complete understanding of charts and strategy.
Longer term trades require a similar understanding of strategy and charts, but rely on a more methodical decision-making process,
and the main challenge here is to minimize risk while allowing trades to run properly.


Trading Strategies

With both the particular instrument and type of timescale for the trade, the trading strategy is next. It is possible to trade both Forex and CFDs using fundamental or technical analysis, and even a combination of the two. Forex pairs are influenced by economics of the countries involved, while in the case of CFDs, indices are heavily influenced by local economic data

Technical analysis has been proven effective in all these markets as well, and a cohesive trading strategy that takes both aspects into account can be very successful.


Trading is a skill that needs to be learned and refined to suit the individual, and whether trading Forex, CFDs or anything else, it is always skill that powers success.


Your Personal Strategy

Finding the right strategy that works for the individual is important, the style of trading, the instruments used,
and the risk involved all play a part, and while it may not seem obvious to those starting out on their trading journey,
we all react to each of those things differently, which is why one strategy may simply not be suitable for
any given individual but successful for others.



Trading Risks

In particular, the level of risk involved is important, excessive risk that a trader is simply not comfortable with
can lead to bad decision making and poor performance, for instance. That risk manifests through
leverage, with higher leverage, and higher risks per point, it can reduce stop options and see trades fail quickly if they go against you.
In this way, investing in Forex or CFDs brings three considerations, the amount to risk, the timeframe and the market evaluation.
The leverage is part of assessing any potential position, and the key to success trading both Forex and CFDs is learning to balance those aspects.

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