Best CFD Broker

The most common question I hear around trading Contracts for Difference is what is the best time frame when day trading CFDs. Today we’ll have a look at the three most important factors to consider when finding your ideal time frame to trade CFDs.

1.What size wins compared to your losses are you after?

2.Always use three different time frames to trade safely

3.Share CFDs versus Forex or index CFDs. The Various time frames to consider

What size wins compared to your losses are you after?

One of the most critical and overlooked component to day trading success is identifying the appropriate win:loss ratio or what some people refer to as risk:reward ratio. Every day trader needs to have the idea firmly planted in their mind of how important it is to locate day trading opportunities where the chance of reward is the least 1.5 to 2 times the size of their risk.

By keeping this ratio firmly planted in your mind it will ensure you locate high probability opportunities and totally disregard the need to trade just for the sake of trading. Trading for the sake of trading not only loses you valuable time and money it can drain your confidence level to the extent that you hesitate or are reluctant to jump on any other trade. In light of this you want to select the time frame that gives you ample opportunity for profit once your setup has been established.

Using three different time frames to locate high probability day trades

It is vital for day traders to have a success ratio or the probability of winning in excess of 60%. This comes as a result of trading over a short time frame thus reducing the chance of letting winners run. In order to locate high probability set-ups that win more than 60% of the time you would be best to identify short term, medium-term and long-term time frames to put the chance of success in your favour.

If you trade using a 30 minute chart you would be best trading in the direction of the trend and having the five minute chart and one hour chart trending in the same direction as your 30 minute chart. The five minute chart will identify the early set up, the hourly chart will ensure you are trading with the most dominant trend and you can use the 30 minute chart to time your entry. The combination of three different time frames will put the odds of day trading success greatly in your favour.

Day Trading Share CFDs versus Forex or index CFDs. What time frames to consider?

Depending on the type of CFD broker you use and the charts they give you access to, you will find the best time frame for day trading share CFDs is to use the one minute chart for the first 35 to 40 minutes, then move to the two-minute chart over the next two hours and move into the close using a five minute chart. When trading Forex or index CFDs you will find ample opportunity and liquidity using anything from a one minute chart up to the one hour chart.

One of the most dangerous tools available to Day Traders trading Contracts for Difference, Futures or Forex is that ability to access wild amounts of leverage. Leverage is that incredible ‘double edged’ sword that gives you the opportunity for incredible gains on small amounts of money or unforgiveable losses with small amounts of money. Fortunately, when it comes to leverage, you the trader are always in control providing you know how to trade on leverage sensibly.

Is control really in my hands as the trader?

As the trader you have your trading account of say $10,000 which on some trading accounts like forex, will give you the opportunity to trade up to $1 million in total positions. This is referred to as 100 times leverage and if you think about it, is absolutely crazy and the closest thing you are ever going to experience to gambling without being at the casino.

Fortunately for those who trade sensibly, you’ll understand that you actually do control the leverage on your account and with $10,000 you could trade up to $10,000 in total value which means you are using no leverage. The key point to illustrate here is that you can trade ridiculous levels of leverage and wipe your account out overnight, or you could trade sensibly and use the leverage to your advantage.

Can I triple the results of a trading system using leverage?

When you begin using leverage in a sensible way you’ll begin to appreciate that you can maximize your returns whilst only increasing the chance of drawdown in a small way. Let’s say you had a trading system that made 10% per year with no leverage. That means on your $10,000 account you would make $1,000 gross by the years end.

Imagine then if you traded that same system at 3 times leverage, which means instead of trading just $10,000 worth of position you are now trading $30,000 in total positions. Now you simply apply the exact same trading system which historically has been making 10% per year. The main difference now is that you are using a total portfolio size of $30,000 and 10% of that figure is $3,000. When you work out your return you need to base it on your $10,000 capital since that is exactly what you have. Now you can see that you are making 30% per year instead of 10% and all you did was increase the leverage to 3 times your account size.

My trading systems drawdown is not tripled…

Always remember that trading on leverage amplifies your wins and losses. In relation to your trading system making 10% per year you may have experienced a 4% drawdown at its worst point. If you trade at 3 times leverage then you can expect that your worst case drawdown will be approximately 3 times more than the unleveraged result. As a general rule, always trade smaller than what you are currently trading at.

One of the most important things when starting forex trading is testing various forex trading platforms on the internet to select the the one that can fulfill your needs. If you are planning to use automated trading system, this step is still most important since your system still needs a tool to connect to the market.

A trading platform is software that connects a trader and the forex market by providing basic features such as live price, execute orders, and account management. The other features ranged widely depend on the creator and the purpose; some of them are built solely for certain market, the other cover forex, futures, and CFD markets. Usually, forex trading platforms are given free by the brokers when you use their services. It can be comes in two forms: online platform or a software that you must download and install to your computer. These days, these brokers software has quite complete features; at the very least they are all support basic charting which is the bread and butter of forex market analysis. Due to various circumtances, you can’t always use the one from your broker; for instance: if you utilize Expert Advisor (EA) or forex robot, you must have it run under Meta Trader 4 (MT4), a popular trading platform.

So, what do you need from these forex trading platforms? These are some things that a platform should have:

1. Easy access to your account information as well as orders summary. The important thing is it should display real time value of your account based on your current open position. Example: if you close your position at the current price, your account will get profit/loss by 20 pips.

2. Easy access to the currency pair that you want. It should give you real time valid updates on the currency movement and quick live chart for analysis purpose.

3. Easy to execute orders. When get the right entry/exit price, you won’t have time to click various menu or buttons across the platform interface just to execute an order. The means to execute order has to be accessible by various ways.

4. Quick and accurate to execute order. Some forex trading platforms can’t fulfill these requirements on a steady basis. Usually, the problem is the software won’t execute the order that you have given; it will display the ‘waiting’ status while the market price keep moving and make you lose potential profits. This can be due to connection issues which can also be experienced by a credible broker, but there is also other probability: your account is in a scam brokerage. These brokers are designing their forex trading platforms so it will make it hard for you to have a winning trade or proper risk management. Sometimes it will not execute your stop loss order with various excuses afterwards. If you have experienced this again and again, just withdraw your account and find another broker.

Aside from scam brokerage, there are still many credible forex trading platforms that owned by honest forex brokers; just go with a recommended broker and you will be fine. The interface of the platforms might different for each broker, but as long as it is fulfill the four requirements mentioned above, it should serve you well.

Day trading follows the practice of active purchasing and selling of the stocks, options, futures and currencies inside a trading day. All trades are finished within a day to ensure that following the closing of the market the day trader will never maintain any open positions and as a result will not be subjected to any overnight dangers. The traders trade against very little changes in price from the monetary instruments. Day trading is generally a vigorous trading activity requiring higher focus and time during trading sessions.

Day traders can be grouped into two broad groups; scalpers and momentum traders. Scalpers trade in large quantities completing each trade inside seconds or minutes. Most scalpers are generally big monetary firms or investors like institutional traders. Momentum traders are usually solo traders who trade according to the stock market trends. The trading volume of momentum traders usually is dependent on market conditions. Some other well-known trading methods consist of; range trading, news playing and rebate trading.

Day trading could be considered as an offspring of high speed electronic communication networks. Most day traders these days trade markets from a removed location such as their house or work place. They use trading software, which is an immediate access trading platform, set up on their computer connected to the internet to execute trades in real-time. So that you can qualify to execute trades, the investor should sustain a margin within the corresponding market. It’s the day trading broker who maintains the margin for that trader and provides the direct access trading platforms. Even though you will find web-based trading platforms available, they aren’t appropriate for day trading.

The most important thing, (other than the money, trading program and market account) that a day trader needs is the market info. Market data allows day traders to pick suitable products to trade. Day traders require live or real-time market quotes, as a little delay in information can trigger them huge losses. It is the trading program that they use which serves this purpose. Sophisticated systems provide this info as graphics and generally have alerts and triggers to automate trades. Day trading systems also use technical indicators and various mathematical resources to facilitate the picking of stocks, futures, currencies, etc.

As told earlier, you will find a variety of products available for day trading. The most popular ones are the stock and the forex currencies. Others consist of options like stock options and futures options, and futures like currency futures, stock futures, stock index futures and commodity futures. Day trading faciliesy are purchasable for most stock, options and futures market, but note that most brokers provide solutions for restricted markets/exchanges. The investor also should be keen to choose markets relating to the product they’re trading, their financial status, the brokerage they’re affiliated to, the trading program they utilise, and their geographical location.

The advantages of day trading include higher profit making chance, no overnight dangers, high leverage, rapid returns, no margin interests and so on. The disadvantages consist of greater opportunity of loss (particularly to new traders) and also the necessity of higher concentration levels and time. The requirement to payoff interest on margin and transaction expenses can make the scenario more severe. It’s estimated that over 80% of day traders have to afford loss.