Basics – Trading Strategies

Basics – Trading Strategies

After you have acquired a sound understanding of the basics and terminology of CFD options (Contract for Difference), you should then consider studying and mastering trading strategies that will help to improve your profits as well as reducing your risk exposure per trade. Basically, you require techniques that will successfully allow you to analyze the market conditions of the underlying assets of CFD options. You will discover that most strategies utilize a combination of technical and fundamental analysis to achieve this objective by helping evaluate factors such as the direction and volatility of price.

Before you can select a CFD option proficiently, you need to advise and choose a trading strategy that must primarily be constructed on how you want CFD options to function for you. This is because you will discover that a CFD option trading strategy will only produce success for you if you can utilize it in a way to achieve your investment objectives. For example, you could exploit the flexible of options in order to support your planned speculation portfolio in numerous ways.

Consequently, you will find that it is worth devoting your time in detailing your financial plan and listing its major intentions. By doing so, you will filter the number of strategies that may be ideal to you because only a few will then be really able to satisfy and achieve your objectives. The following CFD options strategies will now be explained with this intent in mind. They should help you improve your trading results under a number of different market conditions:

BULL STRATEGY:

You will require such a strategy if you determine that the price of the underlying asset of your CFD option is rising in value. You should then activate a ‘call’ CFD option under these circumstances.

For example, your technical analysis indicates that oil is very likely to increase from its current value of $110 over the short term. You are also aware that you will be entitled to a 87% profit if you open a ‘call’ CFD option with CryptoAllDay.com using oil as its underlying asset. In addition, you also precisely know your risk exposure because if you finish out-of-the-money, you will receive a refund between 10% and 15%.

You next choose to deposit an investment of $1000 and opt for an expiry time of 30 minutes. That is it? These are all the decisions that you have to make. Now, when your expiry time expires and if the price of oil is just $1 higher than your opening or strike value, you will earn a profit of $780 in just 30 minutes.

This is a fantastic return for what appears to be little risk exposure and minimum effort. However, as with any investment decisions you must ensure that you fully understand your objectives and risks before activating any new trades. In this respect, your goals and risks are well-defined as compared to other investment types. In summary, despite all benefits of trading using CFD options, you should always work and adhere to a well-developed trading strategy.

 

BEAR STRATEGY:

You will require such a strategy if you determine that the price of the underlying asset of your CFD option is falling in value. You should now activate a ‘put’ CFD option under these circumstances.

For example, your technical analysis indicates that the EUR/USD currency pair is very likely to decrease from its current value of 1.4000 during the next few hours. You are aware that you will be entitled to a 87% profit if you open a ‘put’ CFD option with CryptoAllDay.com using the EUR/USD as its underlying asset. You also know precisely what your risk exposure is because if you finish out-of-the- money at expiry time then you will receive a refund between 10% and 15% of your initial deposit.

You next choose to invest a deposit of $2000 and opt for an expiry time of 1 hour. Now, when your expiry time expires and if the price of EUR/USD is just 0.0001 below your opening or strike value, you will earn a profit of $1560 in just 1 hour.

 

After you have mastered the basics of CFD options trading and are proficient at operating simple strategies such as the bull and bear ones just defined, you could consider learning how to use more sophisticated strategies such as the following one.

 

RANGE TRADING:

Sometimes when you study the trading charts of an asset of interest, you may decide that its price direction is difficult to accurately determine. With most other forms of investment you may then be stumped about what is your best course of action. However, with CFD options you have other strategies available to you which will allow you to seek profits even under such conditions. For example, you could utilize a strategy which is capable of informing you whether your asset is range trading.

You could exercise such a decision after you had study the trading chart of the asset of interest and determine that over a selected time period that it was not trending in any particular direction but bouncing between a high price level and a low one or floor. Basically, the asset is range trading.

For example, if your technical analysis indicates that the NASDAQ stock index is fairly stable, you could purchase an “IN THE RANGE” CFD option. You can do this by selecting the ‘range’ CFD options, locating your asset type and then choosing “IN”. In contrast, if your studies demonstrate that the price action of your asset is volatile, then you could activate an “out-of-range’ CFD option.

You are well-advised to devote some time to studying and mastering the use of as many CFD options trading strategies as you can. You will then have a supply of tools that you will be able to apply depending on the current market conditions.

 

HOW TO TRADE:

You will discover that our trading platform is a very simple way to speculate on the financial markets compared to other forms of investments. Consequently, you will have improved possibilities of making worthwhile and consistent profits by trading them. In particular, if you become a member of CryptoAllDay.com then you will have the opportunity to gain as much as 87% profit per trade within an hour, even if you are a total novice.

You can increase your profit potential even more and minimize your risk exposure at the same time if you invest your time to study and master CFD option trading strategies. This article introduces and discusses some of the more popular strategies which you find of great use whether you are a nov ice or experienced CFD options trader.

 

PAIRING:

Also known as hedge and double position, this is a clever strategy which possesses the ability to provide you with windows of opportunity for high returns while minimizing your risk exposure in the process. For example, imagine that you have opened a ‘call’ CFD option which had an opening or strike price of $20. Now assume that you have achieved a favorable position and are now in-the-money with the current price standing at $24. However, you are worried that a serious price retraction could occur which could wipe out all your profits and could even cause losses. To safeguard your gains from such an eventuality, you could, at this point, open a new ‘put’ option and pair it with your original ‘call’ one.

By doing so, you would create an opportunity window between $20 and $24. This is because if price finishes within this range at expiry time then you will receive profit payouts from both options. In addition, you would also significantly reduce your risk exposure because should the value of price finish outside this window at expiry time then the profit of one of your options will almost totally negate the loss of the other.

 

STOP-LOSS TRADING:

Many traders use CFD options as a method to hedge their investments with other asset types because they have been proven to be very effective. For example, consider that you are trading the EURUSD currency pair and you are considering utilizing a stop-loss in order to protect your account balance from suffering a serious drawdown. Instead of deploying a standard stop-loss, you could instead activate a CFD option in the opposite direction to your Forex trade by using the EURUSD as its underlying asset. In doing so, you would provide a very effective protection for your EURUSD trade.

However, although a stop-loss trading strategy looks quite simple at first sight, a successful one depends on the quality of your understanding and knowledge about factors such as risk tolerance, trading asset, and your trading style and market conditions.

INDEX-ASSET DIVERGENCE TRADE:

This is another popular strategy that entails hedging a CFD option based on a company’s shares with one whose underlying asset is the trade index that includes the same firm. For example, imagine that you decide to open a ‘call’ CFD option with Apple because you think the value of its shares will appreciate in the near future. In order to hedge this bet and if you also believe that the stock markets will generally fall in value, you could also consider activating a ‘put’ CFD option based on the S&P500 of which Apple is a composite company.

Consequently, this strategy will help you minimize your risk and allow you to support your trust in trading your selected asset. In addition, you could provide yourself with the opportunities to compound your profits, maximize your returns and minimize your risk exposure. For instance, with the example just described you could achieve a double profit pay-out if your calculations prove correct.

 

COMPETITOR RELATIVE VALUE TRADE:

This strategy can help you profit using CFD options by exploiting the opposite price movements of two competing companies. For example, imagine that Microsoft is about to release a new product that is expected to provide a significant boost to the values of its shares.

In addition, you also deduce that rivals, such as Apple, could suffer market share decreases which would have negative influences on the values of their shares. Consequently, by following your fundamental and technical analysis to the full you should open a ‘call’ CFD option with Microsoft and a ‘put’ one with Apple.

This action will then provide you with the opportunity to collect double profits by taking advantage of the competitor relative value trade.

 

COMMODITY STOCKS AFFECT TRADE:

Many traders consider this to be a very powerful and effective CFD options strategy. Basically the idea is to exploit the variance in the movements of commodities on the share values of companies that trade them.

For example, significant movements in the price of aviation fuel can seriously influence the share values of airline companies. Consequently, if you believe that a spike in the price of aviation fuel is imminent then you could consider activating a ‘call’ CFD option with this commodity as its underlying option. In addition, you could hedge this bet by opening a ‘put’ CFD option based on the shares of an appropriate airline because you are anticipating them falling in value as a consequence of this development.

In summary, if you take your time to evaluate CFD options strategies such as those described above then you will find that this is a rewarding undertaking that could significantly boost your profits. This is because you can then provide with opportunities to compound your profits within the same time frame whilst minimizing your risk exposure in the process.

You will find by analyzing CryptoAllDay.com CFD options trading platform that it has been specifically designed with this purpose in mind. You will be very impressed about the quality and quality of the impressive trading strategies and tools available to all CryptoAllDay.com clients especially.

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