CFD day trading strategies - CFD Day trading brokers and trading tips
What is CFD Day strategy
CFD day trading refers to trading various markets such as stocks, currencies, commodities, ETFs and even cryptocurrencies now, through the power of CFD contracts, where the objective is to capture most of the intraday volatility. It’s a fact that when looking at a daily chart of a market, you will see that most of the time the market doesn’t go anywhere. That’s why traders turn to day trading, in an effort to trade more price action. Because even a flat market day does actually provide some fluctuations. And even minor fluctuations can be huge through the power of CFD leverage. All in all day trading offers the following:
- More price action, even on flat days, through the leverage of CFDs
- Better focus on the intraday price action
- The ability to think like investment bank day traders
In any case, day trading is difficult, but it’s proven to work, since I have seen experienced CFD traders who make $10,000 per week. So day trading is without a doubt a goldmine in the hand s of competent traders. Some CFD day traders have years of experience in trading commodities, these are the most profitable CFD traders and they make money faster than they can count it. But it takes enormous commitment and determination to become so good.
In my opinion, commodity and forex CFD day trading is far more safer and more profitable than stock index day trading. There are also cryptocurrencies now, these also may not be suitable for day trading. But commodities and forex really can offer great opportunities day after day, so they are worth looking into.
Day trading is difficult, don’t let anyone fool you into thinking that is easy. Most traders actually lose money because they want to become like those super traders and make $10,000 per week. Only about 30% of medium level traders are profitable, and from those very few will ever become super traders. But this is true of every other profession or business. You always need a lot of experience to make $10,000 per week, no matter what the business is.
CFD day trading methods - my way trading
Personally, I do prefer to be a specialist and trade each market in a slightly different way. In the forex market for example, I prefer to trade GBPUSD and EURJPY, because these are two of several markets that are quite predictable. I prefer these over EURUSD, especially for day trading and for day to day trading. EURUSD is confusing, way too volatile and as a result it gives too many false signals. That’s why I’d rather trade GBPUSD, or a non USD cross pair, such as EURJPY.
In my strategy, I look at the 200 day and 10 day moving averages, to see what the major trend is, and then I zoom in on the chart, on the one hour chart. I use daily LSS pivots, and the Parabolic SAR indicator too, so as to know what the day’s high or low is likely to be. The Parabolic SAR only helps me see where the stops are placed, these are stops of longer term traders, as seen on the daily chart. Longer term traders do have an impact on all day trading action, so don’t make the mistake that swing trading and day trading are independent of one another, because they are not. Good day traders pay attention to the following:
- 200 day and 10 day moving averages
- Patterns on the daily and weekly charts
- Intermarket analysis
If the trend is up, and price is above the 10 day moving average, I look at momentum and the likelihood that price will continue even higher, so as to exceed a previous high. I never think of a market as being overbought or oversold. I also prefer to day trade when market price is away from the 200 day moving average, and when other markets related to the one I am day trading also stand clear of their own 200 day moving averages. Because if you attempt to day trade and price is about to test the 200 day moving average, you can expect to see all kinds of intraday moves. Moves that will not make any sense to you whatsoever. This is because the market is not traded by day traders alone, but also by investors and traders of longer time frames, willing to place their trades at the exact same time.
CFD day trading brokers:
There are some very good, and well rated CFD brokers, which offer very reliable CFD trading and many useful trading tools. Some of the best brokers are the following:
24option CFD Broker
Very good, it offers both binaries and CFDs, it’s regulated and user friendly. It also offers some free trading signals to its customers.
UFX CFD Broker
Strongly regulated and recognized broker, it offers some sentiment analysis tools which can be used in day trading.
Markets.com CFD Broker
Excellent CFD broker, offering wide range of assets and MetaTrader4 platform choice. It can facilitate all kinds of commodity day trading.
AvaTrade CFD Broker
Well proven CFD broker, it offers wide range of platforms, including a web based MetaTrader4. It also offers cryptocurrencies.
eToro CFD Broker
Very good, ideal for beginners. An exclusively CFD broker which offers advanced social trading with great potential, plus cryptocurrencies.
CMSTrader CFD Broker
Very good CFD broker, for more advanced traders. It offers free social trading, many tools, mini lot size trading ideal for medium size day trading.
Trade.com CFD Broker
This broker offers ultra wide range of CFD markets, and tools for trade ideas every day, it’s well regulated and popular among all levels of day traders.
GKFX CFD Broker
A good CFD broker, where day trading can be facilitated very well, it offers few different platforms, including the popular MetaTrader4.
IQ Option CFD Broker
This CFD broker is well regulated, it offers very affordable beginner accounts, and also a wide impressive range of the newest, most active cryptocurrencies.
CFD Day Trading Tips
I do believe that good day trading relies upon solid price analysis, and not on the daily news. Most day traders who attempt to day trade markets on the news, end up losing money and become even more frustrated. Additionally, I do believe that focusing too much on the five minute chart is a mistake, because the latest price action is not necessarily correct. They say the market is always right, but that is not true, neither is the trend always your friend. These are popular myths that have been proven to be just that, myths!
Solid price action comes from the one hour chart, and from at least 24 hours of market action. In the forex market for example, you have 3 major sessions, as the active trading hours are based in 3 different locations. These are the London session, the US session, and the Asian session. That’s why you need at least 24 hours of solid charts, to be able to see all 3 sessions in one chart, in order to figure out market direction.
You can still day trade on the minor moves, between these sessions, but you need to be careful. You always need to know what the underlying trend on the one hour chart is. And you have to use tight stops on trades taken in the opposite direction, and much larger stops on traders taken in the direction of the major trend.
By using the following you can eliminate a lot of the risk:
- 24 hour price action covering all 3 geographical active trading sessions
- LSS pivots
The latest 24 hour price action tells you what to expect, and together with the LSS pivots helps you anticipate the day’s high and low. Realistically you can only predict either the high or the low of the day, not both. Volatility is important, I just know that a market will trade with limited volatility before a news announcement, and then with maximum volatility right when the news is released. I never attempt to view the actual news as bullish or bearish! Only as a volatility indicator.
I also use notional stops in the time domain, and when I open a trade I attempt to assess the probability of making a profit or a loss, by measuring the elapsed time. A profitable trade proves itself quite fast. Whereas a losing trade is usually a trade that stays flat for while, and sooner or later becomes a big loser. It seems that the longer you hold a trade open (this applies to day trading), the less likely it is that it will make a profit. Typically I use a notional time limit of 20 to 30 minutes, and if an open trade fails to impress me within this time limit, I view it as a loser and I close it. More often than not, this precaution is right, and I am able to close losing trades much earlier, resulting at much less loss, or at no loss at all. Waiting for the trade to hit your price stop loss is not wise, beyond a certain time limit, you know that it will trigger your stop loss, it’s more than 95% likely. So why have false hopes, the loss can be minimized.