CFD Trading Strategies
CFD TRADING STRATEGIES
In this section, we will cover the trading strategies used when opening CFD assets trades. As previously mentioned, there exist various CFD asset: i.e., cryptocurrencies, commodities, stocks, indices, and currencies. What sets the asset classes apart is the trading hours. Stocks and indices usually are traded for limited hours during the day. Because of this, you will notice these assets by their breaks in the charts one trading day to the other. For this reason, we removed them from the CFD trading strategy that will be discussed in this section.
This CFD trading strategy uses the iFibonacci.ex4 indicator, which utilizes the Fibonacci ratios to chart both Fibonacci fans including retracement lines in a mechanical fashion, leaving all CFD traders free of this task. It is an excellent system to use for the beginner trader. Among the already mentioned, this indicator also plots Fibonacci arcs, single pivot lines, and other support/resistance lines as desired aiding the investor in CFD trade exits and entries.
Indicator: iFibonacci.ex5 (default setting) Time frame chart: 30-Minutes, 1-Hour, 4-Hours, CFDs:, Commodity CFDs, Cryptocurrency CFDs, and Forex CFDs.
Allow the indicator to map out the retracement lines and fans on the chart automatically. The indicator can be implemented on many CFD charts, this way the investor has the ability to make a trade on anyone if a signal was received.
Different setups can be used to trade on a long entry with the same guidelines apply for short entries as well. Entries can be arranged as a return off the retracement lines or Fibo Zone (FZ) lines (represented by the fan lines). The below example demonstrates how these trades are performed.
The example is a 15-minute chart for Bitcoin/USD. The iFibonacci.ex5 indicator has mapped on this chart, the following:
a. Several Fibo Zone fan lines, coinciding to the Fibonacci numbers 38.2%, 50%, 61.8%. There is also a brown 0% line.
b. The Fibonacci retracement lines paralleling to the Fibonacci numbers 38.2%, 50%, 61.8%, and 100%. There is also a brown 0% line.
c. A brown pivot line, which can be used as a support or resistance, contingent on where the price action is originating from. In this example, the price is advancing from above so it is used as a support.
The nature of trade entry is to trade long off a bounce of price of either/or the pivot line, the Fibo retracement lines or the FZ lines. The trade models shown are all long trades, which means we should look for valid support areas to trade from.
The pivot support is created when a price fails to go below the pivot line, producing both a red doji candle plus a hammer. Thus, Trade 1 is to go long at point X, which is where the 38.2% Fibo Zone line crosses the pivot line. Having used the FZ 38.2% as the access point, the wise exit level would be the FZ line above this, which is the 0% FZ line (shown on chart).
Following this trade, the next support is noticeable at the 61.8% retracement line (points A and B). Therefore the next long entry must be at this level or near to it. This is patterned at point C (pivot line support). A trade opened here has to end at any of the FZ lines above: 61.8%, 50%, and 38.2%, in that order. Here, it concluded at the 50% FZ line.
Are you able to make out possible entry and exit points on the EUR/USD chart below?
If you can, congrats! You have been successful in understanding one of the several CFD trading strategies that you can use.