Profitable CFD Trading

[Frewy]

Hi Everyone,

Wanted to start a discussion focusing on key strategy readers find successful in increasing the profitability of trading.

I have been trading for a short time with moderate success, after initially exceeding my own expectations I have found my returns volatile, with particular difficultly in building momentum.

Would anyone have advice on CFD fundamentals and strategy's which they have used while starting their CFD trading life?

Appreciate any guidance.


Cheers

 

[CapnBirdseye]

Yes, close your account and use your own money. Seriously, the leveraging is super hard to manage, and the learning process costly. Even if you are doing well, I'd now take some time out for some learning and to set some objectives and goals.

After you have closed your account, do some serious reading in to money management and risk. Look on these forums for recommended reading.

 

[Space Invader101]

Frewy, what CFD dealer are you using?

I switched from CFD's back to a share margin loan (Macquarie Prime). MQ Prime don't offer as good leverage as CFD dealers, but better than most margin loans. I've only kept my CMC Markets software and account open to use the real-time charts.

Make sure you use stop losses and understand position sizing to evenly weight your risks.

You can actually use CFD's to trade longer term trends. You pay interest daily on CFD's rather than monthly like a margin loan. You're positions need plenty of wiggle room to avoid a margin call.

 

[vincent191]

I find using cfd for long term trading very expensive unless you are already in the money. I mainly use cfd for very short term trades for longer term I prefer bank personal loans borrowing against the equity in my house. This is my personal preference only.

 

[WBFan]

1.5x leverage of total account eg. on a $10000 account I'm only prepared to use 1.5 leverage giving me $15000. Say I have 5 positions that leaves me with $3000 per position. I base my position size on $3000 and only risk 2%.
Some examples using the same stock price:
Leverage 5%
Share price $5.50
Stop $5.20
Risk 2% or $60
Units 300 shares
Cost $82.50

Leverage 10%
Share price $5.50
Stop $5.20
Risk 2% or $60
Units 300
Cost $165.00

Using this method I'm only risking $60 per trade or $300 over my whole portfolio. Some weeks I make $900-$1200 other weeks $100-300.

Might not be much but as my trading account get bigger I'll earn more.
If my account size was $20000 using the above it would be double.Trade size would be $6000 Unit size would be 600 @5% leverage risk would be $120 per trade or 2% cost of trade $165

Taking all this into consideration you still have to work out the right direction and that is not so easy.

So the important thing is not to be over leveraged overwise you wont be around for long and have a good account size so brokerage wont eat into it.

 

[WBFan]

1.5x leverage of total account eg. on a $10000 account I'm only prepared to use 1.5 leverage giving me $15000. Say I have 5 positions that leaves me with $3000 per position. I base my position size on $3000 and only risk 2%.
Some examples using the same stock price:
Leverage 5%
Share price $5.50
Stop $5.20
Risk 2% or $60
Units 300 shares
Cost $82.50

Leverage 10%
Share price $5.50
Stop $5.20
Risk 2% or $60
Units 300
Cost $165.00

Using this method I'm only risking $60 per trade or $300 over my whole portfolio. Some weeks I make $900-$1200 other weeks $100-300.

Might not be much but as my trading account get bigger I'll earn more.
If my account size was $20000 using the above it would be double.Trade size would be $6000 Unit size would be 600 @5% leverage risk would be $120 per trade or 2% cost of trade $165

Taking all this into consideration you still have to work out the right direction and that is not so easy.

So the important thing is not to be over leveraged overwise you wont be around for long and have a good account size so brokerage wont eat into it.

Just to clarify the ratio is:
1:1.5 on a $10000 bank = $15000
1:2 on a $10000 bank = $20000 etc

Important to know $ per point.

10 CFD's x $0.01 = $0.10
100 CFD's x $0.01 = $1
1,000 CFD's x $0.01 =$10
10,000 CFD's x $0.01 = $100
So beware a 1 cent price move on 10000 CFD's = $100