Choosing CFD Trading Systems

cfd-trading-systemThe CFD trading system has the benefit that it will allow someone without a lot of experience to use this type of financial tool. Without something like this, the lack of experience can make the trading experience quite difficult, especially since there are many concepts that might not be familiar to you. Keep reading and you will learn about these systems and about how you can use them to make trading with CFDs a lot more profitable.

Trading systems explained

No matter for what you use a trading system (CFD, currency, options, stocks, etc), you’re basically working with a collection of criteria that allow you to quickly decide to either exit a tradition position or to enter one. The way the system works is up to you. You can set it up to work completely based on your decisions, you can allow it to do certain things by itself and you can leave it on full automatic. If you go the full automatic route you don’t have a lot of things to do once you’ve set up the rules that should be respected. On the other hand, using one that is only partially automated will give you the option to keep making decisions and becoming better in the long run.

Ideally, the use of such a system should be done while a professional teaches you how it works and how you should take advantage of it for maximum profits. The features mentioned below are things that such systems should always have.

Stop-Loss Feature

This feature gives you the option to exit a position once it turns on you, without suffering a lot of damage in the process. You always need a strategy to use in order to exit the situation you’re in, that’s something true for all investors that know what they’re doing. By putting a stop loss order in the system you make sure that you don’t lose the entire investment.

Be careful while setting up the stop loss, you don’t want it to trigger a sale just because the market dropped by a tiny bit. Place some decent limits in there, that will allow you not to take huge losses.

Trailing Stop-Loss

The advantage of this feature is its capability of giving you the option to keep the profit level locked in whenever trades go the way you want them to. At the same time, it gives you the option to stay with that position if the price keeps going up. With a bigger increase in the CFD price, you can adjust the numbers and you can make sure you have even more profits locked in. At some point the price will fall, but the order you gave will insure that your CFD will not fall with it.

As long as the systems you use come with both these features (trailing and regular stop-loss), you can be sure that you will have much better profits than you have losses. This should happen even if there are more losing trades than there are winning ones.

A Good Ratio of Profit to Loss

This is another thing that a good CFD trading system should be able to offer you. The way it is built should allow you to have more profit than you have losses, as long as you know how to use the system of course. An average profit that is at $400 with an average loss that comes at $200 will give you a ratio of 2 (400/200).

Whenever you’re trying to figure out how good a trading system is, look at both the profit to loss ratio and at the number of winning trades vs the number of losing ones. Both will tell you something about the capability of the system and they form together a profitability ratio. You basically multiply the two ratios and you get the profitability number, which should be more than 1.

You will always get some losing trades, no matter how good the system is. That’s not a problem, but you should still have a decent ratio in whatever system you choose.

You’ve seen above the three things to look at when you’re picking a system for CFD trading, so look for your own and make sure it has all three criteria.

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