Let’s face is not everyone is cut out to be a scalper or day trader after all sitting in front of your PC for hours on end watching numbers go up and down can be stressful. For most people day trading is too difficult as it’s a high risk reward job and requires a medium to large capital outlay at the start. The emotion of day trading often gets to novice traders, being able to manage your emotions is what distinguishes good traders from bad. The fact is not everyone can be a day trader.
When looking inside them minds of successful traders there are certain characteristics that always stand out. Some of the most common characteristics are:
Analytical Mind Good day traders have analytical minds and are able conduct quick calculations and think on their feet, they must be able to identify trends and patterns without relying on a fancy chart or computer program.
Confidence All successful day traders are confident, they are decisive, able to think quickly and have no time for uncertainty or self-doubt as this is what often leads to missing some of the best trading opportunities of the day.
Self Belief Self belief goes hand in hand with confidence, you have to believe in your decisions and run with them. If you are indecisive perhaps day trading is not be a suitable career for you.
Discipline All successful day traders need discipline, once you have a plan stick to it. When day trading you can lose money as well as make money, as losses can result in an end to your career you need to manage your risks, know where to set your limits and stop loss orders accordingly. Once you have met your objectives do what you planned don’t let greed or fear take control of you.
Decisiveness Good day traders don’t hesitate, they run with their decision and trade what they think is right, hesitation often results in missing out on good trading opportunities.
Passion Day trading involves being passionate about the market, a good day trader never switches off tracking the market day in and day out following news globally, analysing charts and looking at quote screens. This all has to be processed as quickly as possible, this is of course is what will give a good day trader an edge.
Dealing with Failure You can never expect to win all the time this is a motto every day trader should remember. You will lose on some occasions and win on others however, as long as you ensure that over time you win more than you lose you will always be successful. If you cannot accept losses then day trading is probably not for you as all good day trades will suffer losses at some stage.
Concentration When day trading you will need to quickly analyse allot of data and reports in order to arrive at decisions quickly and act fast, this all happens in real time so you must be able to focus and avoiding all distractions during the trading session.
If this sounds like you then perhaps you should take up a career in day trading and learn more about CFDs in this very informative free CFD guide.
Australia has the highest per capita share ownership in the world so it’s not surprising that there are so many online traders. The recent explosion of the speculative resource sector has turned everyday people into professional investors, simply through trading shares online. Recently we have seen some phenomenal price moves never before seen in the micro cap resource sector of which many online CFD and share traders have taken advantage of.
Of course before you can get started online trading you must have the right tools for the job. Most online traders can get by with a one PC and monitor and an ADSL internet connection however the more serious online traders tend to use two monitors and have two internet connections to ensure that if one connection goes down they can still trade. Of Course having the right hardware does not mean much if you don’t have a broker account and a trading plan.
Most people new to online trading will choose a broker that they can do both the share and cfd trading thorough, there are relatively few of these so make sure that you do your homework and choose the one that can offer you a platform that suits your trading strategy.
Online trading is a lifestyle change and choosing a strategy that suits is important, generally there are three types of strategies short, medium and long term which each requiring a very different level of attention. Of course there is no point quitting you day job to start online trading CFDs and shares if it results in more work not less. Most people give online trading a go for a few months, starting with a relatively small capital outlay before they commit to trading full time.
To learn more about CFD trading you can download and read this free CFD Guide.
ECN is an acronym for Electronic Communications Network. A Forex ECN broker does not have a dealing desk but instead provides a marketplace where multiple market makers, banks and traders can enter in competing bids and offers and have their trades filled by multiple liquidity providers in an anonymous trading environment. The trades are done in the name of the ECN broker, providing you with complete anonymity. A trader might have their buy order filled by liquidity provider "A", and close the same order against liquidity provider "B", or have their trade matched internally by the bid or offer of another trader. The best bid and offer is displayed to the trader along with the market depth which is the combined volume available at each price level. A large number of market participants providing pricing to the ECN broker leads to tighter spreads. ECN brokers typically charge a commission for matching trades between their clients and liquidity providers.
Using an ECN broker to trade forex offers a number of significant advantages, the most apparent being tight spreads and deep liquidity. Tight spreads means that day traders and scalpers can take advantage of small price movements on an intraday basis. Deep liquidity means that large volumes can be traded without having any effect on price this is especially important in volatile market conditions and offers significant advantages for traders using automated forex trading systems. These two factors combined mean that you will be able to take advantage of more trading opportunities, more opportunity equals more profit potential.
There are a number of ECN brokers available in the marketplace today with the most common ECN being Currenex. Currenex is typically used by institutions and investment banks and out of reach for most retail traders, however in recent times as the demand for tight spreads and transparency has improved significantly many commonly know retail trading platforms such as Metatrader have been adapted to suit ECN brokers. Now more than ever the bridge between retail investors and investment banks is narrowing.
Of course using an ECN broker will not be of any advantage if you do not have a trading strategy or plan in place. Formulating a forex trading strategy that takes into consideration your risk profile, lifestyle and capital outlay is essential before you start trading. After formulating your trading strategy you should then try a few forex platform demos to determine which platform best suits your trading strategy. Of course it is important that you choose a forex platform offered by an ECN broker. It can often be difficult to determine and ECN broker, however as a rule of thumb ECN brokers will charge commission on your transaction rather quoting you a widened spread.
To learn more about forex trading using an ECN broker you can download our free FOREX Guide.
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.
CFD trading can be lucrative for those traders with a proper trading and risk management strategy in place however like any new venture learning the ropes can be difficult. CFD trading requires skill and knowledge of financial markets in addition to a proper trading plan. The unfortunate fact is that many novice CFD traders fail, failure is often caused by a lack of discipline and knowledge of financial markets.
Good CFD education can fast track the learning process that any new CFD trader should undergo prior to starting out. Free CFD seminars are always a good starting point as most CFD seminars cover the basics of CFD trading which can help novice traders understand the essentials, paving the way for the development of a trading plan to suit their lifestyle and risk profile.
Of course most free CFD seminars will only cover the basic elements of CFD trading. It is always recommended to enrol in a paid education course designed especially for CFD traders if more advanced knowledge is required. There are many paid CFD trading courses available which can help prospective CFD traders build a good understanding of the product itself, formulate a trading plan and learn proper risk management strategies.
The CFD trading courses available are all very different some are more advanced than others this is why it is important to choose a course that covers the key elements of CFD trading. Below are four essential elements that a good CFD trading course should cover:
1. How CFDs can be used within you overall wealth management strategy.
2. Risk management and how to incorporate it into a trading plan.
3. How to develop a trading plan to suit your lifestyle.
4. How to properly develop a money management plan.
Of course these elements are very broad and should only be used as a guide when choosing a suitable CFD trading course.
Attending CFD seminars and paid educational courses will help you with the theoretical component of your trading education however theory is only of value when it is applied in practice. The providers of some paid CFD educational courses will also offer you mentoring and coaching services, this is an essential competent in the educational process as more often than not the biggest and most expensive mistakes will be made in your first month of trading. Having a trading coach when you first start out will help you gain confidence before going out on your own.
After the first few trades you will begin to realise the power of CFDs and how can use them in your trading strategy, of course trading CFDs also comes with risks which if not managed correctly though a disciplined risk management plan can result in losses, this is why good CFD education is essential.
To learn more about CFD trading you can download our free CFD Guide.
CFD providers all have very different margin rates some offer margins from 1% others start at 5% but are margin rates really important in a well balanced CFD trading strategy?
CFD providers will vary their margin rates depending on the product over which the CFD is based, for example foreign exchange CFDs are typically offered at around 1% margin, the reason for this is simply because the foreign exchange market is the biggest and most liquid market in the world and the risk of currencies gapping is minimal. On the other hand the margin rates on share CFDs will typically vary between 5% to around 35%, the reason for higher share CFD margin rates is because shares tend to be less liquid than currencies. CFD providers will assess the risk of each share CFD individually and adjust the margin to cover the likelihood of the share gapping in volatile market conditions.
In determining the margin rates on share CFDs, CFD providers will generally look at liquidity of the stock, its market capitalisation and its historical price movements. Based on these three main criteria in addition to a few other factors a margin rate will be determined. It is important to note that some CFD providers may offer CFDs on 100% margin allowing them to provide a greater range of CFDs but providing no real benefit to the client.
Index CFDs offered by many CFD providers are a great way of gaining exposure to the overall market without having to buy futures contracts or a basket of shares. Index CFDs are typically offered on margin rates of 1% to 2%, the margin rate will vary depending on the index being traded.
So how do CFD margin rates affect you? Of course the lower the margin rate the better you are able to utilise the money in your CFD trading account thus your return on investment (RIO) will be greater, however as CFDs are leveraged instruments it’s not advisable to utilise the full amount of your deposit as margin, doing so would put you at risk of a margin call or even liquidation.
Typically with a good trading and risk management plan in place most CFD traders will allocate one third of their account balance to meet the margin requirements for their open positions, one third will be allocated to meet the margin requirements on intraday positions or opportunistic trades, the last one third remains on call to meet any additional margin requirements on open positions.
In Conclusion
Yes, CFD margin rates are important however leverage is only one of the many tools in a CFD trader’s arsenal and should be used in conjunction with a proper risk management plan and well balanced portfolio. No matter the amount of leverage you are provided if you do not have a trading strategy in place you will not be a successful trader.
To learn more about CFD margin rates and how to develop a trading plan you can download our free CFD Guide.
There are two main types of CFDs, direct market access (DMA) and market made (MM). The most popular type is the market made variety. The reason for the popularity of market made CFDs is simply because CFD providers offering this type of CFD are also able to offer CFDs over indices and forex pairs. DMA CFDs are typically more common with traders that are more familiar with share trading for the simple reason that DMA CFDs allow traders to participate in the opening and closing phases of the market and also the order book of the underlying security over which the DMA CFD is based. Both varieties of CFD have their place amongst traders and investors and it is important that you choose the type that suits your trading style.
It is not uncommon for day traders and scalpers to utilise DMA CFDs rather than the market made variety as their orders flow directly onto the exchange and there is no market maker intervention meaning that order execution speed is often quicker with no risk of being re-quoted. DMA CFDs are also favoured because day traders are able to participate and influence the opening and closing match price. The opening and closing phases of the market are the most liquid and of course liquidly is essential in any effective day trading strategy.
Often day traders also have CFD trading accounts with CFD providers offering the market made variety. The reason for this is because day traders like to monitor the movement of the cash indices, in addition to being able to trade them. Market made index CFDs are a cheap simple alternative to trading the actual futures contract which generally requires a higher upfront margin.
Some CFD providers offer both DMA and market made CFD from the same platform, this is the preferred solution for active day traders as it means that their DMA share CFD positions can be cross margined against their indice and forex CFD positions. Having both DMA and market made CFDs in one account also saves allot of paperwork as only one account needs to be managed, making the preparation of tax returns much easier.
Day traders often use both DMA and market made CFDs in their trading strategy, CFD providers who only offer market made CFDs refer to these traders as snipers as their strategy revolves around taking advantage of price discrepancies between DMA and market made CFDs. Such discrepancies often occur during the opening and closing phases of the market as it is during these phases that there are significant price changes, some of which may not be accurately reflected in the price of the market made CFD. These pricing inaccuracies can result in arbitrage opportunities for shrewd traders.
It is important to note that each and every trader has their own trading style, some styles are better suited to DMA CFDs and others to the market made variety. Before making the selection between DMA or market made CFDs you should consider your trading style and determine whether the speed and accuracy of DMA CFDs or the versatility of the market made variety is better suited to you.
To find out more about trading CFDs you should download a copy of your free CFD Guide.
There are many good CFD brokers in Australia, their active marketing and promotions make it difficult to chose, some have advantages over the others but more often than not it is their fancy marketing makes you confident in your choice of provider.
When you sweep away all of the fog and evaluate each of the best CFD brokers on a few key metrics you will soon discover which provider genuinely suits your trading needs.
There are as few key metrics that you should judge your CFD broker on, these are:
• DMA or Market Made
• Web based or Downloadable trading platform
• Product Range
DMA or Market Made
It is important to ensure that you understand the differences between DMA and Market Made CFDs and the pro’s and con’s of each. DMA CFDs offer a few advantages in that they allow you to trade the opening and close phase of the market in addition to allowing you to participate in the market depth. DMA CFD are popular with scalpers and day traders but are not so popular with traders needing exposure to indices or currencies and wanting to place guaranteed stop loss orders, this is where Market Made CFDs have significant advantages over their DMA cousins.
Web Based or Downloadable trading platform
It can be quite confusing when choosing a CFD brokers platform as each platform has benefits and drawbacks. It is important to consider where you will be trading from as this will decide whether you use a web based or downloadable platform. If you intend to trade from work it would be better to choose a web based trading platform for the simple reason that web based platforms do not require a download, this means that they cannot be blocked by the firewall in an office, however, web based platforms come with some downside also in that they tend to lack much of the advanced charting functionality of downloadable platforms. Downloadable platforms a more suitable for home use as they offer significantly more advanced charts and order types in addition to added features such as back testing and customisable multi screen layouts. Professional day-traders and scalpers often prefer using downloadable platforms whereas casual traders tend to choose web based platforms.
Product Range
It is important that when choosing the best CFD broker for your needs you should assess the products that they offer to ensure that can provide a range of CFDs that suit your trading plan. Some CFD brokers only offer CFDs on Australian Shares however others offer CFDs over stocks, indices and forex. If your trading plan covers all of these products you should be sure to choose a provider that does not restrict you to Australian share CFDs only.
Of course when choosing the best CFD broker for your trading needs you will need to asses all of the metrics above and make your determination based on your trading strategy. It is also advisable to download a few demo trading platforms available in the market, this will help you better understand whether the platform is suitable for your needs and trading style.
To understand CFDs in more detail and to learn how to develop a trading plan you can download our free CFD Guide.
Learning to trade DMA CFDs is often fairly daunting initially, with new traders having to master the trading platform offered by their DMA CFD provider and of course develop a trading plan. Trading can be enjoyable and rewarding if you take some time in the beginning to do your homework, below are some essential tips to assist novice traders who are getting started.
1. Develop a trading plan
A common mistake new trader’s make is that they use an inappropriate trading strategy, or worse still, they have got no plan at all. Adopting a trading strategy and using it on a consistent basis, provides a framework of discipline. It is also likely that this is going to deliver better results than a hap-hazard approach or using a frequently changing number of approaches. Care should be taken when deciding on a strategy. It would be a mistake to attempt trading a technique dependent on five minute charts if you're unable to access your trading platform for much of the trading day. Likewise, it would be a mistake to use a strategy based on monthly charts if your trading horizon is calculated in days or weeks.
Certain traders tend to believe that a more complex system is usually a better system. They build techniques that employ huge numbers of inputs and require tremendously complex calculations and algorithms. They regularly produce graphs which are so heavily covered in indicators that it becomes difficult to spot the price action. While a few of these complicated systems certainly are effective, the greater the number of inputs and calculations they need, the more potential there is for something to go wrong. In some ways, a simple approach is usually superior (and easier to stick to with confidence) than a more complicated approach.
One of many strategies employed by a lot of traders is the short trade. This is where a trader sells a CFD that they don’t currently hold in anticipation of buying it back again at a cheaper price in the future. While it can be argued that there is no difference between taking a long position or a short position, a short position might not be suitable for a conservative trader. In theory, a short position holds much greater risk than a long position, this is because of the difference in the maximum possible downside for each type of trade. When holding a long CFD position, the worst possible move could be for the CFD to fall to zero and become worthless. For a short position, where losses will mount as prices rise, the maximum loss is limitless. While holding a short CFD position over an equity with a skyrocketing price is unlikely, it is possible. It would be a mistake for a very conservative trader to trade on the short side, especially without a stop loss order in place.
2. Learn how to use your trading platform
It can sometimes be a steep learning curve when trading on a new platform however once you have spent the time and effort and overcome any lingering fears of technology you'll realise that this is important if you are to be a successful online trader. It is no good waiting until you have open positions and the markets start moving before you determine how to put on or alter a stop-loss or take-profit order. You must ‘know’ how to manoeuvre around the platform and open, close or adjust orders without needing to look up the platform user guide.
You also need to plan for more extreme situations. Think about what might occur if your internet connection were to break down or if your PC became infected with a virus and wasn't operating at its peak. As a preventive measure, it is wise to write down your CFD provider’s telephone number near your PC. Additionally it is good practice to keep a list of your open positions so that you know what your exposure is.
3. Take accountability for your trades
Most traders closely keep an eye on their open positions but there are those that make the mistake of not doing so. By frequently checking on your open positions you'll know what your overall exposure to the market is and whether or not you're in profit or loss situation.
As well as trading mistakes, some traders simply forget that they have placed certain orders, or because they do not understand the platform they find that they have by accident placed orders without meaning to do so. It's best to discover these errors as fast as possible by keeping track of your open positions. Mistakes made when entering trades tend to be more frequent than you might think. Traders frequently hit buy instead of sell (or vice versa) or enter the incorrect quantity or even the wrong ticker symbol. These are simple errors that tend to be put down to having a “fat finger”. However, if you take your trading seriously, you need to make sure that you exercise the proper amount of care.
CFD Trading can easily be very rewarding and enjoyable if you spend some time at the start educating yourself and learning the tools of your trade. Naturally it is always important to keep in mind that trading DMA CFDs can be risky, however the tips outlined above will assist you in managing risk and will help you to avoid many of the mistakes traders make when starting out.
To learn more about DMA CFDs you can download our free DMA CFD Guide.
Day trading contracts for difference (CFDs), stocks or indices, has become popular in recent times. The popularity of day trading has been largely due to numerous advertisements for money making systems, seminars and educational courses that guarantee overnight success. Many of these courses also profess to be low risk and require only a small capital outlay. The truth is, trading is hard work, the more time you devote developing a successful trading plan the more likely it is that you will succeed, however you should be aware that success will not come overnight or without losses.
Once you have put in the time and effort to formulate a trading strategy only then should you consider becoming a professional day trader. Day trading offers many lifestyle benefits including the ability to be your own boss, you no longer need to go into work and take orders from your boss. However, you should not take this freedom for granted, trading should be treated as a business and you must be discipline in order to succeed. If you do not apply discipline to your trading you should not consider trading as a career.
There are significant lifestyle benefits that come with day trading, being you own boss allows you to chose your working hours and even your office, you can work from home or whilst on holidays. Getting into day trading requires little capital outlay as all a Day trader needs is a trading account, computer and internet access. Before you run out and buy yourself a new computer remember that you should also have sufficient funds in your trading account, a common mistake day traders make is that they are undercapitalized when they first start. You should start with at least $20,000 - $30,000 this will allow you to develop and refine your trading strategy and allow you to recover from mistakes.
The time you spend analyzing and watching the markets will depend the trading strategy that you adopt. Day trading and scalping requires constant monitoring of the market as day traders look to profit from small price movements, whilst swing trading requires that trades be held open for 2-3 days, meaning that you do not need to spend as much time in front of the computer.
Although trading professionally from home allows you to choose your own working hours, it is very important to be aware of key times during the day, in the stock market these are the opening and closing phases of the market, in Australia this is 10am and 4pm. You should also be aware of major overseas market movements and how they affect the local market that you are trading and specific announcements relating to the company’s that you are trading.
Do not believe the promises of guaranteed returns develop and back test your own trading strategies that suit your lifestyle and the time you have to spend on your trading. Trade your strategy and refine it as required, remember you will make mistakes but don’t be disillusioned this is common, simply understand where you went wrong and refine your strategy. Once you have developed a strategy that works for you and suits your lifestyle you will be rewarded with the advantages that being a day trader has.
There are a number of CFD providers that can assist you in getting started, but be sure to choose a CFD provider that is able to offer you a reliable trading platform.
To learn more about trading CFDs from home for a living you should read our free CFD Guide.
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