When it comes to CFD trading, one of the most important things is understanding everything associated with contracts for difference. At first glance, CFD seems very simple but after you start, it quickly becomes obvious that there is a lot to be learned.
Remember the fact that there is always a risk with every single CFD trade that you start. You can use trading platforms like investous.com and start trading right away but you should only do this after you perform technical analysis. This is where you manage to figure out if a trade has a higher chance of being a success or not. Your goal should be to trade only when there is a high possibility of success, even if this is never a guarantee. You have to be prepared for losses and gains.
The most important things to remember about technical analysis in CFD trading are:
- Technical analysis is practically a price action study. The analysts make decisions based on patterns and historical trends. When specific key market levels are reached and they are similar to patterns identified in the past, there is a higher possibility that history will repeat itself.
- Charts are always useful to help you choose if a share has a high earning potential, together with good entry and exit points. The only problem is that technical analysis should never be seen as perfect. There is always the possibility that a reversal will happen. Usually, the best thing to do is to opt for weekly analysis and avoid the daily trades as a beginner as they are much riskier.
- Create a shortlist of the potential short- and long-term positions that you consider investing in. Then, analyze them all but do it at an individual level. When you notice that an instrument is trading tightly for a long period of time, the possibility of success is much higher. This is what you have to look at. When you want to identify great CFD trades, analyze them one at a time.
- Try to find those options that will make higher lows and higher highs. This is because it is a good idea to work towards established trends. These are the ones that usually persist for a longer period of time.
- Always look for key resistance and support levels. These are really important key points on every single price chart that you analyze. They were approached but were not breached. As an example, when a position has been going on for a long time but price approaches one of the key resistance levels, it is a sign that you have to close or open a CFD trading position.
Remember that these are just some tips that can be mentioned. In CFD trading, technical analysis is vital. You want to be sure that you know as much as possible about the position you open before you make the final decision. If you do not do this, you open the door to a lot more risk than already exists. Never trade if you are not comfortable with the risk level and accept the fact that there is risk associated with every single trade.