CFD trading platforms offer the facility for you to trade the financial markets, but only you can implement a winning strategy to make money trading.
If you are looking for a CFD trading strategy, these three golden rules are a good place to start:
1) Run your wins, cut your losses
This requires discipline and one of the main reasons that people lose money trading is because they are too eager to lock in a profit. Trading CFDs is a numbers game and the best hedge fund managers in the world only get it right about half the time.
That means that half of the trades they execute a loss. The market is based on trend and reversion so technical analysis plays a high part in short and long-term CFD trading.
If you call a trend-right you are going to make money if you leave the trade open, if it a loser cut it straight away. You can do this by using a stop loss or a trailing stop loss.
2) Don’t overtrade
If you only have £10,000 to play with you definitely don’t want to put all that into one trade. Sure, if it’s a winner great but if it’s a slow mover or a loss then you are stuck and won’t be able to enter into any new positions when potentially profitable opportunities come up.
Plus, if there is a shock short-term overall market then you’ll get a margin call and be forced to close your positions because you can’t cover the variation margin. Being forced to close a position is one of the worst things that can happen to your trading strategy.
3) Diversify your positions
One of the great things that CFD brokers provide the facility for is making money when the market goes down. This means that you can have a wide range of positions but actually remain fairly market neutral.
For example, if you are short some individual stocks because you think they are badly managed then you are exposed to an upwards move in the markets. So you can hedge using a CFD position in the underlying index to protect against this. You could also have some long positions in similar sector stocks as some protection.
The key thing to remember is that profitable CFD traders don’t open massive single positions and hope for the best.
If you want CFD trading tips, most financial media produce daily buy and sell recommendations which are often a good source of stimulus.
One thing to remember though is that stock tips in the papers are usually based on fundamental analysis with a longer-term view as opposed to CFD trading which usually employs market timing and technical analysis as this is more relevant for short-term price moves in liquid stocks.
Here are our top providers for CFD trading ideas and tips:
- An FCA-regulated CFD trading platform – most CFD brokers can provide analysis and trading signals. City Index for example has an excellent trading signal section called SMART Signals.
- Investors Intelligence – since 1942 they have provided daily long/short trading ideas and model portfolios
- Stockopedia – set up screens and get trading ideas from fund manager strategies
- Trading Central – trading signals based on technical analysis
- Autochartist– trading signals based on technical analysis
- Stockomendation – aggregates stock recommendations
- FuturesTechs – subscription service for professional and semi-professional traders
- Good Money Guide – our daily updated trading signals feed displays potential buy and sell targets for UK stocks
These services act independently from CFD trading platforms and are in some cases regulated by the FCA .They often highlight trading signals and CFD trading buy and sell signals, but it is up to the trader to decide if they are any good and worth of a trade.
You can also get a form of CFD trading tips from the social trading brokers, where you can follow traders and copy their trades. But, picking a trader to follow is just as hard as picking a winning stock. If you look at the people that make money on social trading platforms a lot of them mirror the portfolios of top global growth funds or have just had a bit of luck.
Where to trade CFDs?
Most established CFD trading platforms have one or more of these services integrated into their CFD trading platform or provide it through a subsidised or separate subscription if asked. If you are looking for a CFD broker you can view our CFD account comparison tables, read our guide on how to compare CFD trading platforms or find out what to avoid when choosing a CFD platform.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
You can contact Richard at richard@goodmoneyguide.com
