Intraday trading with CFDs can be the path to fortune, but it takes courage and alertness to maximize profits from this type of trading. Intraday trading means that your trading action is over and done with every day, and only rarely would any intraday trader hold any position overnight. This is great if you want to go on vacation without having to keep checking markets, but during the hours you are trading you need to be fully focused on the job at hand.
CFDs are well-suited to intraday trading. First and foremost, they are a leveraged product, which means you don't need a lot of cash to command control of a decent size stock holding. Typically, depending what the CFD is based on, your margin requirement or the cash you need to have in your account is only 5% to 10% of the value.
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Secondly, CFDs are available based on many different financial products, giving you the choice to find whichever security is behaving most favourably for trading at the moment. You do not need to have accounts at several different brokers or dealers in order to become involved in trading commodities, Forex, indices, foreign interests and other things.
CFDs make it as easy to go short on a product as to take a long position, and when you are intraday trading for those minor fluctuations up and down in price, they are convenient and simple to use. One issue for longer-term use of CFDs is that, as a margined product, you pay interest every day. When you are intraday trading this is irrelevant, as if you do not hold a position overnight there is no interest due.
In addition, you have the advantage that you are not exposing yourself to the risk of a share CFD gapping up or down overnight as a result of global market movements. As you are only holding your trading positions for very short periods you are not locking up your trading capital, which means that when you see a trading opportunity you will have the funds in your account to place the trade.
It is seldom that you will get a big change in price in any one day, so intraday trading relies on commanding large quantities of the underlying stock or commodity in order to get reasonable size gains from small price moves. If you do not have a lot of money, this fact would prevent you from intraday trading in the customary way. CFDs make it possible for you to take part in this exciting world. There are several strategies to succeed at intraday trading, mostly requiring you to react quickly and jump onto a swing or trend which is emerging. You see what really matters here is which way the price of an asset is moving and how quickly you spot the prevailing trend. For instance if you see a stock price tick up every few minutes – 23, 24, 27, 28, then you have an up trend. Your choices are to either join the action quickly or sit out the rise.
For day trading technical analysis is definitely your friend. Technical analysis certainly suits me since most of the times I'm too lazy to to research fundamentals/company accounts/business models/markets and economics. I like the idea that I do not need to worry about what the market is doing and because I know nothing about oil it is easier to trade in terms of 'what you see'. The fundamentals may be unsound - perhaps the Price/Earnings ratio is exceedingly high or the dividend yield is non-existent or you don't fully understand the company but an intraday trader won't care about such issues - the fact is that something is making the share move up and you should ride the trend until you get factual proof that it has ended. At least that is my rational for the moment! Too, that all trades are closed each and every day aids a good night's sleep. I hope never to see a cardiac stent or a heart valve ever again.
As with all trading, you should be careful to preserve your capital and act quickly to exit a trade if it goes against you - try a trailing stop. This follows an asset up but with a fixed trigger, say a 10% drop. The leverage available with contracts for difference, while great for multiplying profits, means that you cannot afford to let your losses grow. You need to trade in a volatile stock or instrument with good liquidity, so that your trades can be filled quickly and have a good swing.
Intraday trading counts as one of the riskier types of trading, but offers large rewards quickly. If you are interested in taking it up, make sure that you have a workplace without distractions, a detailed plan of action, and a good broker.
