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Using Technical Analysis for CFD Trading |
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Technical analysis can be a vital tool in CFD trading particularly for short-medium term traders.
The closest alternative, fundamental analysis, can be useful, but when CFD trading over a matter of hours or weeks, the fundamental value of a company might not necessarily come into the equation.
With technical analysis you use past data to identify trends, reversal points and potential price targets; all extremely advantageous pieces of information in any form of CFD trading. Technical analysis can also be used to effectively inform stop loss and limit order decisions in CFD trading.
Using Technical Analysis for CFD Trading
CFD broker City Index offers a free seminar entitled 'Technical Analysis for Beginners'. This CFD trading seminar, available to members and non-members alike, is led by the company's Chief Technical Analyst Sandy Jadeja.
Over the course of the 90 minute interactive workshop, Mr Jadeja maps out the several key ways to technically analyse a financial market, demonstrating how to chart performance, use historical patterns and focus on trends.
Identifying a trend, whether rising or falling, can be one of the most attractive trading strategies for beginners trading contracts for difference. Sandy Jadeja states: "Especially for those just starting out, you want to be able to just scroll through the securities on your charting package and pick out nice, smooth charts of movements in one direction or the other."
Naturally, every seasoned trader who employs technical analysis has their own preferred methods and techniques. One thing that most agree on, however, is that technical analysis is best kept simple.
CFD Technical Analysis Charts
Clear analysis is aided by clear presentation, as CFDs expert Mr Jadeja asserts. "I prefer open-hi-lo-close bars to Japanese candlesticks. Candlesticks can be a powerful tool, but far too many people get bogged down in looking for specific patterns and they end up forcing them on the chart when they aren't really there."
Mr Jadeja also believes that quality data is an essential aspect of technical analysis. "Getting clean data is crucial: it's probably worth paying more for good data even if that means spending less on the charting package itself. Traded prices, rather than theoretical prices, are essential."
CFD Trading - Technical Analysis and Fundamental Analysis
Though technical analysis is generally far less time-consuming than fundamental analysis, it is important to remember that it is based entirely on developments in the past, not in the future or even the present.
As always, whether you ultimately decide to base your CFD trading on technical analysis, fundamental analysis or a combination of the two, ensure that you fully understand the risks involved.
For more details see City Index.
City Index Account / City Index Website
Contracts for Difference (CFDs), margined forex and financial spread trading are leveraged products and may not be suitable for everyone. Losses can exceed your initial deposit. Please ensure that you fully understand the risks involved and seek independent financial advice where necessary.
Using Technical Analysis for CFD Trading, last edited by F. Lawson, 24-Apr-12.
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Warning: Contracts for Difference (CFDs), margined forex and financial spread trading are leveraged products and may not be suitable for everyone. Losses can exceed your initial deposit. Please ensure that you fully understand the risks involved and seek independent financial advice where necessary.
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