CFD trading on Forex and other assets, 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, however, it requires high levels of skills, knowledge, and experience in order to have consistent returns.
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:
All of these have the liquidity and profit/loss potential to make them attractive.
For CFDs, 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.
With both the particular instrument and type of timescale for the trade, the trading strategy is next. At ForexTB, you are only allowed to trade CFDs on a series of assets. Forex is one of the assets offered by ForexTB to trade CFDs on them. The same applies for Indices. CFDs presented as Indices which is not correct.
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 and whether trading CFDs on Forex or anything else’. Also, as mentioned above, successful trading is achieved by high levels of skill, knowledge and experience.
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.
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, trading CFDs on Forex or other assets 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 successful trading both Forex and CFDs is learning to balance those aspects.
Trading in Forex/CFD carry a high level of risk to your capital due to the volatility of the underlying market. These products may not be suitable for all investors. Therefore, you should ensure that you understand the risks and seek advice from an independent and suitably licensed financial advisor