By far the most general question asked among budding CFD traders is ‘what are the most profitable CFD day trading strategies or the best winning CFD trading strategies that the profitable CFD traders utilize?’
Here we’ll take a look at the top 5 causes why day traders opt for trading a contract for difference over other derivative outputs and uncover the most general CFD day trading plans.
No overnight investing
CFDs have definitely improved into the ideal choice for short term day traders and there are a several basic reasons for this. Firstly, CFDs incur a financing rate when you keep a position overnight. The financing for long positions is usually the RBA rate (cash rate) +2%. So if the RBA rate is 7% then you pay 9% per year counted back as a day rate. One option to evade this is to take away your position before the trading day has ended up, thus avoiding the CFD financing rates.
CFD Leverage for day traders is unbelievable
Another considerable reason that CFD day trading strategies are quite popular is due to the fantastic leverage you have access to. You see, if you had $5,000 in a stock trading account then you are able to only trade $5,000 and a 5% move on $5,000 is only $250.
CFD liquidity on the top 100 ASX stocks is solid
The main key for short term day traders is a quite a liquid market and unlike other derivative items such as options, CFDs mirror the liquidity of the underlying stock market. When trading utilizing a Direct Market Access (DMA) provider you are able to get access to and can see the exact volume accessible on every stock at muliple levels of depth.
Low commission level for CFD traders
By far the hugest highlight for CFD day traders quite low commission rates. Indeed some of the most well known CFD products are the index CFDs which are without any commission. This gives you access to a fast moving product with ample liquidity for zero brokerage.
Even if you are day trading the top 100 CFDs, the brokerage is still too low. The great number of CFD brokers in Australia charge a minimum of $10 or 0.1% and this makes the day traders very happy.
Day Traders opt for volatility which as been quite high recently.
Volatility and CFD trading are the perfect couple. Day traders can’t allow sit there watching a stock go nowhere, they want movement and quick movement. When the markets are changeable, short term day traders are in their element and as usual profiting handsomely from the short sharp intraday movements.
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