CFD Trading

Hi Guys …..we have discussed setting up a CFD GC page, so I thought I’d kick off… I’d welcome any thoughts on this stuff below. I’m thinking the point of this GC thread is to share stocks / indeces and stuff like gold or maybe even major currency pairs that have recently started to trend and where entry points could be looming for positions to be established, long and short. Hold periods could be I suppose a couple of hours up to a few weeks.

I have been thoroughly studying a very good book called “Trading Full Circle” by Jea Yu. Its full price is £180, but searching around you can get it for c £100. It is by far and away the best book I’ve read and is a long way ahead of stuff like Elder’s “Come into my trading room”.

I thought I’d summarise what I’m thinking at the moment. When it comes to a leveraged product I think we are looking to manage risk as far as possible, and my view is that it means “trading with trend” and only in a fertile market environment.

I think the biggest thing I have learned recently is on the topic of “market fertility”. Identical set-ups at different times can have very different results usually as a result of the prevailing trading environment. Characteristics of fertile markets 1) minimal amount of chop 2) volume 3) trend 4) good oscillation ranges. This environment will forgive sloppy or late entries/exits. It is much easier for a sloppy trader to make cash in a fertile market than for a professional in an infertile market.

Fertility also is dependent upon time of the day. Opening bell till c 11am is fertile. And US open till close. The period between that is more tricky and should be avoided.

When looking at the AIM All share graph over the last 6 months and comparing it to the monthly P&L in my trading account, it becomes very clear that the sideways chop from towards the end of September to end of October and then the downtrend thereafter correlates nicely with bad returns for going long AIM stocks. Trading counter trend like this ought to be kept to prime trades only ... it’s like trying to play a hand of poker with a 2 and 3 draw in the same bullish style as if you had a pair of jacks (ie very risky;).

My current timing of trades objective is to reduce as far as possible the urge to pick tops and bottoms. Betting on reversals I don’t think qualifies as high probability trading (unless it’s the first time a stock hits major support / resistance in which case its very likely to reverse).

It’s best to let a trend assert itself and when it pauses slightly and re-asserts itself jump on waiting for the pop. The leverage will do the rest for us.


Tying all this together for CFD’s -

1) I’m being careful as to the market environment (also using say 15 min chart of the index and its futures as the guide and also not putting a long position on as futures are falling) – making sure if you are going long on a stock, the index has its 5 period MA above its 15, both rising.

2) Waiting for a trend to develop in chosen target (eg for longs - rising 5 and 15 period Moving averages on chosen timeframe, 5 period above the 15)

3) Waiting for a bit of sideways movement in 5 period MA towards the 15 MA, and then waiting for the stochastics to cross back up, waiting for the resumption in upward direction to push a candle close back above the 5 period MA (this can be further confirmed by a hammer or shooting star, by MACD, by Ichimoku clouds, Volume Oscillator or whatever oscillator floats your cruise liner)

4) Using multiple timeframes to “foreshadow” moves. 60 or 15 min charts are useful to determine trend, entry areas and wider moves. Timing of entries fine tuned on shorter timeframes say 6, 3 or 1 min charts. The length of timeframe best will depend on liquidity and volume.

5) Where daily/weekly charts suggest a trending trade then this will be more powerful – use shorter term charts again to time entries.


I will post some very initial thoughts on soon to be trending or recently started trending stuff a bit later. Thanks for reading (haha it’s waaaay too long) and I’m hoping we will all post thoughts on here for CFD trades.

ok i understand the principle and played the FTSE tonight in my head and gained 12 points on short and this is a basic question but can someone explain the ticket on individual stocks IG as in order level and size, being used to normal trading i feel abit stupid asking but there are many like me p.s anyone else starting a venture halifax has limited stockson aim i am now using IG it has near enough all what i plan on shorting at certain points .

DD-nothing wrong with Elder’s “Come into my trading room”.Its a good first book. TA is subjective in my opinion and there are a lot of different opinions...GL

Well done Ding' - well you're evidently much brighter than me!! - I feel a couple of books and much hair loss coming on!! ;-)

I think I'll be spending a lot longer prepping before setting trades on CFD's than just buying stock. But I love the Tax free angle and improved liquidity - some I'm sure some investment of time and testing the old grey matter will pay dividends - eventually. I shall call in regularly for CFD chats...

Thanks for setting it up - good man..

three letters CEY got to be a good cfd short

good bit. you can tell which ones the sloppy traders are cos' they're the ones moaning in an infertile market.

I think the biggest thing I have learned recently is on the topic of “market fertility”. Identical set-ups at different times can have very different results usually as a result of the prevailing trading environment. Characteristics of fertile markets 1) minimal amount of chop 2) volume 3) trend 4) good oscillation ranges. This environment will forgive sloppy or late entries/exits. It is much easier for a sloppy trader to make cash in a fertile market than for a professional in an infertile market.

Morning guys - thanks for your posts.. PDOG, i agree Elder's book is good, his stuff on divergence is very useful. i think there are important bits missing tho in every book and so best not to treat it as a holy grail.

FTSE 100 now been chopping around this important resistance level for 3 days. No conviction to the upside at the moment despite very accommodative Fed policy last night.

I think we could be close to breaking to the downside, so am looking for shorts to put on in preparation if this happens..

HH - CEY ouch! has been in auction for much of the morning.. initial bounce and now no trend. did you go short?

haroldhadrada shorting CEY is 50/50 as you could win or lose. Although buying this morning at 21p would have been great. A bit risky at present.

stocks to short LLOYDS,BARC,RBS,SDR. IF you have nerves of steel short or go long on the DJI at present, it dropped 100 points last night. The chart shows it is due a drop but this could change depending on what fiscal cliff agreement is made. The ftse moves with the dow it hit 5960 last night. At some point in the new year we could see a drop to 5600. So if this does happen at £10 a point from 5900 thats £3k profit. We may get a Bull trap first if we get a Fiscal cliff agreement, but after that it is down hill IMHO. For this reason I am not buying many stocks and selling a percentage of my PF.

Infact If we do get a Bull trap then that would be a great time to sell and put shorts on ready for the big drop, then go long. All theory so far,but if you are in the bear camp it is more than possible. The tight descending wedges on the british banks point to a drop.