What You Need to Know About Day Trading Contracts For Difference

With day trading CFDs there are certain concerns that people raise and among them are the best time frame for CFD trading during the day. However, there are other factors that you need to consider when it comes to CFD trading during the day that will help you find the ideal time to trade CFDs. You need to determine what size wins compared to losses you are after, always use the three different time frames to trade safely, and share CFDs versus forex or index CFDs.

The size wins compared to losses that you are after is the most important component that has been ignored by many. However, successful day CFD trading relies on identifying the appropriate win to loss ratio, otherwise also known as risk: reward ratio. It is important that each day the trader see the importance of locating day CFD trading opportunities where the chance of reward is the least 1.5 to 2 times the size of their risk. When you keep this ratio pasted in your mind it will ensure you locate high probability opportunities and totally disregard the need to trade blindly.

When you trade blindly you will not only waste your valuable time but also your money and it can even affect your confidence level such that you will even be reluctant to jump on any other trade. Therefore, it is important that you select the best time frame that allows you enough time to make profits once your setup has been established. It is also very important that as a day trader you have the probability of winning in excess of 60%. This comes as a result of trading over a short time frame hence reducing the chance of letting the winner run. Therefore, in order to locate high probability set-ups that win more than 60% of the time, you need to identify short-term, medium-term and long-term time frames to tailor the chance to make a profit in your favor.

You need to consider that if you trade using a 30-miniute chart you will be better off CFD trading in the direction of the trend and having the five minute chart and one hour chart trending in the same direction as your 30 minute chart. The 30 minute chart will identify the early set up, while the hourly chart will ensure that your CFD trading is with the prevailing trend whereas you can use the 30 minute chart to time your entry. These combinations of the three time frames will put odds of the day trade in your favor.

It is important that you note that depending on the type of the CFD provider that you use and the charts they allow you to have access to; the secret to finding the best time frame for day CFD trading is to use the one minute chart for the first 35-45 minutes. Thereafter, move to the two-minute chart for the next two hours and proceed to close with the five minute chart.


Kate Anivitti is the author of this article on CFD.
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