There are numerous strategies that traders can actually employ in making a position in contracts for difference or CFD trading. You can choose the short term strategies while you can also choose the long term strategies as well as other applicable approaches. This article will specifically discuss the first one, which is the various approaches in short term strategies.
First and foremost, short term CFD strategies look CFD trading in just hours instead of days due to aspect of the financing costs as well as the other mechanisms on how the said costs are passed to the traders.
As we all know, the financing costs are only an issue when the positions are being held overnight. Aside from that, allowing the position of a trader to roll over even up to the next trading days is already incurring more extra charges. Of course, this may still depend on the specific nature of the trade or transaction. Nevertheless, what this generally means is that those charges can be treated as indicators that such position is indeed unprofitable. Hence, what a good trader needs to do instead is find other financially sound position by way of closing out or taking the gains before the trading day ends.
However, the mere avoidance of the other overnight charges is not the only thing that short term strategies in spread betting can actually offer. As a matter of fact, there is a lot more that this approach can boast about.
For instance, having a short term position, the movement of the market will be limited to only few possibilities. What this means is that while trading CFDs is indeed best applicable in a volatile type of market, it is somewhat close to impossible for such market to totally collapse just within the single trading day. Nevertheless, it does not mean that it will never happen in such a way. The lesson behind this is that having a short strategy or position in spread betting is a little bit more secure from suffering on the possible of a total collapse of the market.
In other words, what I previously said is actually relative. I have said this because even if the market falls down within a trading, there is a less probability for you to suffer from a market shut down compared if you are trading in long term strategies like a month or so. This is because in the latter situation, you are more exposed to a lot more movements and possibilities in the market that you no longer have control.
On the other hand, however, short term strategies in CFD trading have some setbacks as well like in any kind of strategies or approaches. One of these major drawbacks of this is the issue on commissions as well as transactions fees.
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