The Top 5 Reasons Why Day Traders Love Contract For Difference
By far the most common question asked among budding CFD traders is ‘what are the most profitable CFD day trading schemes or the best winning CFD trading strategies that the successful CFD traders use?’
Here we’ll take a look at several reasons why day traders prefer to trade a contract for difference over other derivative products and uncover the most general CFD day trading plans.
No overnight financing
CFDs have absolutely evolved into the ideal selection for short term day traders and there are a some main reasons for this. Firstly, CFDs incur a financing rate when you keep a position overnight. The financing for long positions is usually the RBA rate (cash rate) +2%. So if the RBA level is 7% then you pay 9% for year counted back as a day rate. One way to evade this is to take away your position before the trading day is over, therefore evading the CFD financing rates.
CFD Leverage for day traders is incredible
Another key cause that CFD day trading strategies are quite popular is due to the incredible leverage you have access to. You see, if you had $5,000 in a stock trading account then you are able to just trade $5,000 and a 5% move on $5,000 is just $250.
CFD liquidity on the top 100 ASX stocks is solid
One of the keys for not long term day traders is a quite a liquid market and unlike other derivative products such as options, CFDs reflect the liquidity of the underlying stock market. When trading utilizing a Direct Market Access (DMA) provider you are able to obtain access to and can notice the exact volume available on every stock at muliple levels of depth.
Low commission rates for CFD traders
By far the hugest highlight for CFD day traders quite low commission rates. Indeed some of the most well known CFD outputs are the index CFDs which are commission free. This provides you access to a fast moving product with ample liquidity for zero brokerage.
Even if you are day trading the top 100 CFDs, the brokerage is still too low. Many CFD brokers in Australia charge a minimum of $10 or 0.1% and this makes the day traders quite happy.
Day Traders opt for volatility which as been rather high recently.
Volatility and CFD trading are the perfect couple. Day traders are not able to afford to sit there watching a stock go nowhere, they want movement and fast movement. When the markets are changeable, short term day traders are in their element and as usual benefiting handsomely from the short sharp intraday movements.