Articles of Interest

WebIRESS is one of the most commonly used CFD and Share trading platforms in Australia, being adopted by some of the country's largest online brokers and leading CFD providers. In recent times webIRESS has undergone a makeover, with the latest version webIRESS Plus recently being launched.

WebIRESS Plus offers day traders and scalpers a number of significant advantages over it's predecessor, with the most noticeable being the speed of order execution, additional advanced order types and visual improvements. The significant improvements of webIRESS Plus make it the ideal CFD trading platform for day traders and scalpers looking to take advantage of rapid CFD price movements in the opening and closing phases of the market and during market volatility.

WebIRESS Plus is fast becoming the most popular CFD trading platform in the market due to the significant edge traders are able to gain as a result of the platforms dramatic speed improvement. In addition to the speed improvements in webIRESS Plus, there are now also a number of new order varieties including if-done orders, meaning CFD traders now have more control over their trades with the ability to set and forget orders.

Despite the significant advantages webIRESS Plus offers day traders and scalpers it is important to note that the speed advantages of webIRESS Plus are dependent on the internet connection being used. As an active trader it is always advisable to ensure that you have the fastest and most reliable internet connection possible, this may mean having an ADSL2 or cable broadband connection. Most active traders will always have two internet connections to ensure redundancy should one connection fail.

Active day traders often use the webIRESS Plus platform alongside an advanced charting package or market scanning tool. One of the more common and readily available charting packages is MetaStock another lesser known package is Spark. Spark is popular with more active day traders who monitor many CFDs at the same time and require detailed real-time information relating to price and volume changes which when combined with chart formations allow them to identify trading opportunities such as price and volume breakouts.

Of course a great trading platform, charting package and internet connection alone will not make anyone a successful trader. These are simply tools that will give you the edge over other traders in the market. The most important components of trading are information flow and discipline which when combined with a proper trading plan and tools will help you on your way to becoming a successful trader.

Currently webIRESS Plus is only available from IC Markets. You can download a webIRESS demo to see whether the platform suits your needs.

Before you start trading Contracts for difference it is important to obtain a few tips from the professionals to make sure that you do not make many of the costly mistakes that newbie traders make. Below are three trading pointers which will help you in your CFD trading success.

1. Manage your Positions
Repeatedly new traders spend a significant amount of time selecting, planning and executing new positions, however they regularly make the mistake of exiting these trades with much less thought. This is unfortunate as it is the exit which will determine whether a trade has been profitable or not.

It is human nature to take profits hastily while the concern of incurring a loss will see the same trader leaving poorly performing positions open in the hope that prices will move in the correct direction and reduce losses or even turn them into profitable trades.

Numerous new traders forget about the old saying “Let your profits run and cut your losses short”. As the proverb states if you have a profitable position, it is best to allow that trade to realize its full potential, as opposed to closing it out at the very first sign of a small return. On the other hand, if you happen to hold a position that is moving against you, it is best to move quickly to exit that position, before the loss becomes too great.

If you're managing your trades properly, your average winning trade should be significantly larger than your average losing trade. Once you have the discipline to buy and sell in this way, you should be able to achieve overall profitability even when only half of your trades are winners. A lot of traders make the mistake of not closing poorly performing positions fast enough. One tool that makes this less complicated is a stop-loss order.

After you have determined a price level that corresponds with the amount of risk that you are prepared to take on a particular trade, a stop-loss order can be placed at this level to automatically close out the trade. This removes the human aspect from the exit, reducing the risk that the emotion of hope will interfere with rational decision making.

It is important to understand that a stop-loss order simply provides a trigger point for the execution of an order. If a sell stop has been placed on a long position, the stop-loss will be activated if the price trades at or beneath the nominated stop level. Occasionally, this may lead to trades being executed a price that is less favorable than the nominated stop-loss price. This is known as slippage.

2. Understand the instrument that you're trading
Being over-the-counter products, there are various differences in the contract specifications of CFDs. If you are thinking of trading these products, it is critical to know what these specifications are.

You must also be aware of the influence that foreign exchange fluctuations might have on your holdings. If the base currency of the CFD rises against the base currency of your account your profits could be eroded by any currency fluctuation or your losses might be made worse.

Most CFD traders trade CFDs based on stocks listed in their home country. The simple reason for this is that traders are more comfortable trading CFDs that they're familiar with. Most traders also benefit from the convenience of trading their home market as it isn't practical to sit up for half the night to trade a Contract for difference over a share listed on an exchange in another part of the world?

In lots of cases it is much better to stick with CFDs based on equities listed on exchanges that you're familiar with as opposed to trading Contracts for difference based on stocks listed on markets you don't fully understand.

3. Use the correct order types
You should treat trading as a serious business. As such, you must take some time to make sure that you thoroughly understand the tools of your business. Many CFD traders miss chances or have been stopped up out of trades at the wrong time just because they placed the wrong kind of order.
                   
At the very least, be certain to become familiar with the following order types:

Market order: This kind of order is utilized to execute a trade at the present market price.

Stop-order: This order type is utilized to exit a trade at a specific price. Stop-orders are placed at a level that's worse than prices presently available in the market. On a long position, the stop-loss order to sell would be located below the present market price. Conversely, on a short position, the stop-loss order to buy would be placed at a level greater than present market prices.

Limit order: A limit order is used to exit a trade. Limit orders are placed at a level that is better than the present market price. When seeking to lock-in profits on an open long position, a limit order to sell would be placed at a level greater than current market prices. If seeking to lock-in profits on a short position, a limit order to buy would be placed at a level underneath current market prices.

You must always understand that as Contracts for difference are leveraged and that buying and selling them can be risky. However if used correctly Contracts for difference will become a valuable tool within your trading arsenal.

To find out more about CFDs you can download our complimentary CFD Guide.

Trading mistakes can be made by even the most experienced professionals. Most mistakes made by traders come about as a result of a lack of preparation, knowledge or discipline. Whilst it is important to learn from your mistakes, it is even better and much less expensive to learn from the mistakes of others.

Below are three of the most common mistakes made by CFD traders:

1. Excessive Leverage
One of the main benefits of CFD trading is the ability to gain exposure to a share, index or foreign exchange contract with a relatively small capital outlay. Rather than paying for the full notional value of the CFD position CFD traders can enter into positions with margins as low as 5% or even less. It is important to note that although a smaller capital outlay is required to open the position the CFD trader is still exposed to the price movement of the share CFD for the full notional value of the position. A CFD trader trading a CFD at 5% margin is leveraging their initial outlay by 20 times, meaning a $5,000 deposit could be used to open a $200,000 CFD position.

As only a fraction of the face-value of the trade is outlaid when trading CFDs a small price change could result in substantial gains but also substantial losses. For example when trading a CFD on a margin of 5%, a price rise of 1% in the underlying market may result in gains of 20%, however, if price fell by 1%, it may result in a loss of 20% of the amount required to open the position.

It is important to remember that leverage is a double-edged sword not only can it work for you but if not managed correctly it can also work against you, often novice trades ignore the fact that if unmanaged leverage can result in substantial losses.

2. Not understanding the impact of trade sizes on your account
Due to the leverage associated with CFD trading, relatively small outlays can result in large moves in your overall account balance.

For example buying 10,000 CFDs priced as $2.40 on a margin of 5% requires an outlay of only $1,200. With an outlay of only $1,200 you can hold a $24,000 CFD position. Should the price of this position move one cent it will have an impact of $100 on the profit or loss on the traders account.

If the price of the this position increased by 12 cents a profit of $1,200 would have been made, However, if the price of the position fell by the same amount a loss of $1,200 would have been made.

The overall impact of any price movement will depend on the traders overall account balance. For a trader with an account balance of $1,500, the aforementioned trade would have had a significant impact on the traders account profit and loss. Should a trader with an account balance of $40,000 open the same position the relative impact would be much less significant.

A loss of $1,200 on a $1,500 account would result in the 80% of the total account balance being lost. However, a loss of $1,200 on a $40,000 account would result in a loss of only 3% of the account balance.

3. Trading in too large parcels
It is important to calculate the exposure your trade size before placing the trade. It is common for novice CFD traders the simply trade the maximum size available to the based on their account balance without considering the amount of market exposure associated with the position.

There are a variety of methods traders can adopt in order to calculate position size. A simply strategy is to determine an acceptable amount of risk capital should the trade go against you and calculate an acceptable position size base on this.

Should you want to restrict losses on any given trade to $200 you would calculate your position size based on your stop-loss price. For example, if the CFD was priced at $1.40 and you stop-loss was at $1.15 your risk amount would be $0.25, to calculate your position size you would simply divide the loss you would be prepared to take by the risk amount. In this case this would be $200 / $0.25 = 800, therefore your position size should be 800 units.

The method outlined above is known as fixed fractional position sizing in which a certain percentage of the overall account balance is risked on each trade. Other methods include allocating a fixed dollar amount to each trade, buying or selling a fixed number of CFDs in each trade or varying the size trades according to the profitability of your account.

Using a position sizing strategy will help you avoid the mistake of placing all of your eggs in one basket.

To find out more about CFD trading you can download our free CFD Guide.

There are numerous different CFD order variations, many of which are hybrid varieties of the two major order types market and limit. A market order is simply an order designed to trigger the buying or selling of a CFD at the current market price. A limit order is an order which allows you to specify the buy price or sell price of a CFD. In the case of a buy limit order the price would be below the present market price and in the case of a sell limit order the price would be higher than the current market price.

Limit Orders
Limit orders are used to enter or exit positions. As an example, as a way to enter a long CFD position, you could use a limit order to buy the CFD if the price trades at an exact price or lower. Generally limit orders can only be placed during the times specified by the exchange on which the instrument the Contract for difference is based on is listed. There are however some CFD companies which will allow you to place limit buy orders outside the hours specified by the exchanges, these CFD providers will hold your order off-market and place the order automatically when allowed to do so by the exchange. Which means you will be able to get into the market the next day if the CFD trades at or below the price of your order.

In some other cases, it is possible to exit a long CFD position with a limit order to sell. Assume that the price of the CFD is $1.25 and you're in the market to buy. You set a limit sell order at your profit target which is $1.75. If the price rises to or exceeds the $1.75 mark, your CFD position is going to be closed at your profit target.

Stop Orders
Orders which are used to buy CFDs when the price trades at or higher than a limit price are know as CFD stop orders, orders which you use to sell the CFDs during a time when the price trades at or beneath the limit price are also known stop orders. Exactly like limit orders, stop orders can be used to enter or exit a position. If a trade goes against you, stop orders are usually used called “stop loss” orders and are used to exit a position. For example, assume that you have bought CFDs at a price of $1.50 and the stop loss order is set at $1.25. If the price of the CFDs falls to or below $1.25, you will sell the CFDs and will exit the position. You can use stop orders for taking profits on trades also, lets assume that in the instance above you set your stop order at $1.75. If the price of the CFDs rise to $1.75, you will sell the CFDs and exit the position, stop orders utilised in this way are known as "take profit" orders.

Stop orders can be utilized not only for exiting positions but also for getting into new positions. To illustrate, let’s say the present price of a CFD is $1.50 and you placed a stop buy order at $1.80. Your position will be opened if the price rises up to and above $1.80. The exact same logic applies should you wish to short sell the CFD at a price below the price at which it's currently trading. Using the example above if you wished to open a short position when the price falls to $1.30 you would place your stop sell order at $1.30. Should the price fall to $1.30 your short position will be opened.

If Done Orders
"If done" orders are a specific form of order that allow traders to activate an order only after another order is filled. For example, in the event you place a limit order to enter a CFD position but don't want the stop loss order to be activated until the position is opened you would use an "if done" order. Using "if done" orders will let you set a limit order to enter a CFD at a target price and set your stop loss or take profit order to be placed before your limit order is even filled. Using "if-done" orders means that you will not need to regularly monitor your portfolio to check whether your limit order is filled. 

Order Execution
Not all CFD providers execute orders in the same way. Some providers may require that before your stop loss is filled a sufficient amount of underlying stock is traded at the price of your stop loss order. On the other hand, some providers might require only that the underlying stock was traded at the price to in order for your order to be filled.

Remember, before you start using some of the more complex order types mentioned above it's essential to understand how they work and whether or not they  fit your trading strategy. 

You can learn more about CFD trading and the way they work in our free CFD Guide.