The Basic 5 Causes Why Day Traders Opt For Contract For Difference

By far the most general question requested among budding CFD traders is ‘what are the best CFD day trading strategies or the best winning CFD trading strategies that the successful CFD traders employ?’

Here we’ll look at several reasons why day traders prefer to trade a contract for difference over different derivative outputs and uncover the most common CFD day trading plans.

No overnight financing
CFDs have absolutely evolved into the ideal selection for short term day traders and there are a several main causes for this. Firstly, CFDs incur a financing rate when you hold a position overnight. The financing for long positions is usually the RBA rate (cash rate) +2%. So if the RBA level is 7% then you pay 9% each year counted back as a day rate. One variant to evade this is to take away your position before the trading day has ended up, thus evading the CFD financing rates.

CFD Leverage for day traders is incredible
One more considerable reason that CFD day trading strategies are quite popular is because of the incredible leverage you have access to. You see, if you had $5,000 in a stock trading account then you can only trade $5,000 and a 5% move on $5,000 is just $250.

CFD liquidity on the top 100 ASX stocks is solid
One of the keys for short term day traders is a highly liquid market and not ordinary other derivative products like options, CFDs reflect the liquidity of the underlying stock market. When trading using a Direct Market Access (DMA) provider you can get access to and can notice the exact volume accessible on each stock at different levels of depth.

Low commission rates for CFD traders
By far the biggest highlight for CFD day traders the very low commission rates. In fact certain of the most popular CFD products are the index CFDs which are without any commission. This provides you access to a fast moving product with ample liquidity for zero brokerage.
Pretend if you are day trading the top 100 CFDs, the brokerage is still too low. Many CFD brokers in Australia charge a minimum of $10 or 0.1% and this keeps the day traders quite happy.

Day Traders opt for volatility which as been rather high recently.
Volatility and CFD trading are the perfect couple. Day traders are not able to afford to sit there watching a stock run nowhere, they wish movement and fast movement. When the markets are volatile, short term day traders are in their element and usually benefiting handsomely from the short sharp intraday steps.

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