CFD trading strategies to trade stocks, Forex and more

Different types of CFD trading strategies

There are multiple trading styles you can adopt to potentially generate profits from the stock markets using CFDs. However, the best strategy for you might not be the best one for another new CFD trader. Ultimately, the four following CFD strategies have their pros and cons and may suit those with specific personality traits and/or lifestyles.

Swing trading

Swing trading involves taking positions on some of the biggest listed companies on the planet at both ends of the market movement. If you were confident that a share price will rise significantly over a short-term period, you would look to enter a long (buy) order as soon as possible and close the trade by entering a (sell) order as soon as the price move upwards reaches its ceiling. It’s a trading strategy underpinned by technical analysis of markets and graphs, as well as fundamental supply and demand.

Day and end-of-day trading

This particular CFD trading strategy is employed by retail investors looking to be active in the markets during the daytime i.e. when the stock markets across Europe and North America are open. Day trading sees traders take time-limited positions on stocks before closing them at the end of each trading day. They never leave themselves exposed overnight.

Those with less time to commit may wish to consider end-of-day trading too. It’s a good starting point for beginners as you can use both technical and fundamental indicators to determine the likely direction of the price when a market reopens the following day. Although, the focus isn’t always necessarily on stocks; a day’s trading can include trading CFDs in forex and other commodoties.

Scalping

Retail investors that scalp the CFD markets typically place short-term trades that are opened and closed within a matter of minutes, sometimes seconds. Scalpers attempt to earn small, consistent profits from each trade, accumulating steady growth with minimal risk. It’s one of the more disciplined CFD strategies, which suits more risk-averse traders.

You can’t expect huge profits from scalping, however, providing you abide by your exit strategy, you can avoid sizeable losses too. Scalpers usually aim to have their risk vs. reward ratio at around 1:1, though this is not always doable.

News-based trading

Ideal for retail investors that are yet to sharpen up their technical CFD trading skills, news-based trading strategies rely solely on fundamental factors that can influence the stock markets, as well as the forex markets. Fundamental CFD traders need to be perceptive and capable of understanding how certain news or press releases will affect certain stocks or, broader still, entire industries.

It’s possible that news-based trading will require you to leave positions open in the market overnight, making it important to utilise stop losses and take profit orders.