Is CFD Trading Right For you?

When trading Contracts for difference it is very important to choose the best CFD provider. Generally many people look for the reliable trading platform, best commission rates and widest product range and however there are many aspects of a CFD provider which you should consider.

Firstly, you should create a checklist of the items to investigate prior to choosing your CFD provider:

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  1. What markets are CFDs offered on?

Some Contracts for difference providers only offer CFDs over ASX listed stocks others offer CFDs over stocks listed on many global exchanges. You need to work out what CFDs you intend to trade in your trading strategy and choose a provider that is able to offer the CFDs you plan to trade. You can go for CMC Markets which will enable you to trade online.

 

  1. Can my CFD provider offer more than just CFDs?

Some Banks, Brokers and even CFD providers can offer CFDs but many simply ‘white label’ the offering of a specialist Contract for difference provider to offer CFDs as an additional product next to shares, futures and options. If you trade multiple products you should consider choosing a CFD provided that can service all of your needs at once, however, if you are only likely to trade CFDs, a specialized provider would better suit your needs.

 

  1. What margins and fees do I pay?

All CFD providers have different margin requirements and fees. Generally CFD providers will charge you fees for the following:

  • Holding a Position Overnight (financing)
  • Exchange Data
  • Transaction Fees (commission)
  • Trading Platform
  • Negative Account Balances

Many people look at commission charges alone without considering the financing cost that CFD providers charge when holding positions overnight. You should look at all charges holistically and take into account that most CFD providers will not pay you as much interest on your free cash as you would get from a bank.

 

  1. What platform should I use?

Before choosing a provider you should trial a demonstration of the trading platform that they use. There are many types of trading platforms some are very simple and easy to use, whilst others are difficult and complicated. Each any every trader has their own preference and trading style some prefer platforms with advanced charting packages whilst others prefer simple and easy to use platforms.

It is important to be aware that some CFD providers charge for their trading platform, in many cases these CFD providers have outsourced their technology and need to pay a third party. It is also very important to ensure that the platform that you use can offer the order types that your trading strategy requires, some platforms do not offer trailing stop-loss orders and others do not offer if-done orders. You should ensure that the platform you chose is suitable for your trading style and can offer you all of the features that you require.

 

  1. What range of CFDs should my provider offer?

Aside from shares CFDs are offered over a variety of different instruments including foreign exchange contracts, commodities and indices. Some CFD providers do not offer CFDs on all of these instruments. You should determine whether these instruments form part of your overall trading strategy before choosing a CFD provider as this may be a determining factor.

 

  1. What is a spread?

The spread is the difference between the bid and the ask price, typically spreads are only applied to index and foreign exchange CFDs. Crossing the spread is much the same as a paying commission, this is how CFD providers makes money from their clients trading activity. Spreads can vary from provider to provider, much like commission there is not one standard spread all providers charge.

 

  1. What margins should I pay?

Each Contract for difference provider offers CFDs on different margin rates, these can be as low as 1 percent or up to 100 percent. The margin you pay will vary depending on the liquidity of the underlying instrument over which the CFD is based. You should be aware that margin can work in your benefit or against you. Should you choose a CFD provider that offers low margin rates you should carefully evaluate as to whether you wish to use the full amount of leverage offered to you by you by the CFD provider. Low margins should not be the determining factor in choosing a CFD provider but rather you should consider the product range offered by the provider.

 

  1. How long has the provider been operating for?

You should ensure that your provider is well established and can offer you the customer service that as a new trader you will require. You should call up a few providers and experience their service first hand or even visit their office to see their operations.

In Conclusion

As a new CFD trader it is important to shop around and choose a provider that will best suit your trading style, remember not all providers are created equal. Ask the right questions and chose a provider that can allow you to focus on what is really important, that is your trading.

All you Need to know About Corporate Fixed Deposits

With attractive interest rates and uncomplicated terms and conditions, Fixed Deposits have become popular amongst people who prefer safe investment plans.

A Fixed Deposit requires you to invest a lump sum for a specific period of time. Usually, the rate of interest for a Fixed Deposit depends on the tenure you choose, and is non-negotiable. You can use online FD calculators to predetermine your overall gain from your investment.

Although you can withdraw an FD whenever you want, it’s advisable you wait until its maturity date. Premature withdrawal will result in loss of interest and you might even have to pay a penalty.

Though FD returns are lower, when compared to other investment options available in the market, they’re steady and guaranteed. Hence, first-time investors generally prefer investing in bank Fixed Deposits to avoid taking unnecessary risks.

But, if you’re willing to take a little risk to earn higher returns, then you should consider investing in corporate Fixed Deposits.

 

What are Corporate Fixed Deposits?

Corporate Fixed Deposits are offered by companies instead of banks and NBFCs and they come with a higher rate of interest. However, before you invest in a corporate FD, you should know that it’s a risky investment scheme.

Companies offering corporate FDs run a risk of getting bankrupt or they can be hit by recession at any time. If this happens, they might not be able to repay the principal or interest amount when your FD matures.

Also, remember that in the case of a corporate FD, TDS is applicable if the interest amount crosses Rs.5,000. Whereas, in the case of conventional Fixed Deposits, you don’t have to pay TDS unless the interest earned is more than Rs.10,000. So easy way to bypass TDS on FD interest.

 

How to Invest in Corporate Fixed Deposits?

You can apply for a corporate FD by either downloading the application form from the company’s website or collecting it in person from their office. If you’ve made up your mind to invest in a corporate FD, you should be careful about the company you choose.

Financial institutions like CRISIL and ICRA rate companies based on their financial stability and customer service. You should opt for corporates with AAA rating as they offer some of the best FD rates and are not likely to go bankrupt anytime soon.

Corporate Fixed Deposits are good investment options as they come with a high rate of interest. However, before investing in them, you should verify the company’s financial status to ensure that you’ll be repaid when the FDs mature.

Binary Options Strategies for Newcomers

Binary options have caught the fascination of many traders who look to earn money faster than the conventional investment ways. Though they are considered somewhat risky, there is no doubt that these options are much more lucrative than any other form of investment or trading alternatives. Since not much money is needed to gain from these options, many people are now considering them as a convenient way to make money.

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About Binary Options

They are aspecial type of variants of options. Options, as we know are derivatives. The investor or trader gets to buy a contract, in which if the predictions of the trader isright then he or she gets the sum agreed as in the contract, or nothing if his/her prediction fails. In contrast, conventional options contract allow the investors or traders to opt out of the contract if the price of anunderlying asset is not moving in the direction as anticipated by them or fail to reach the amount that they anticipated, absorbing fewerlosses in the process. In binary options, there is no way the buyer can mitigate losses from within the contract. The option buyer has to look at other strategies to play in this market and earn profits. The word “call” is for investment or buying, and the word “put” is for selling. If you are a beginner and want to know more about “what are binary options,” then you should certainly read the helpful guides to gain the comprehensive knowledge about binary options.

Binary Options Strategies

Over the years several strategies have been identified for earning profits from binary options trades. Some binary options traders are comfortable with sticking with one strategy whereas others prefer changing plans depending upon asset on which the binary option is based. Yet others combine these strategies.

Here are a few of the commonly used binary options strategies that traders use and which any newcomer desirous of trading in binary options should learn.

  1. Trend Strategy

As the name suggests, it is based on thetrend. If the market is moving upwards, it indicates the trend upwards, and betting on the asset’s price moving upwards is more likely to fetch profits. The trend lines are straight lines tracing the candle graph of the asset’s price movement on theexchange. If the slope of this line is minimal, trading in binary options needs to be avoided. The rule is to buy a “call” binary option if the trend is upwards and opt for “put” binary option if the trend is downwards.

  1. Pinocchio Strategy

This is a more complex strategy and needs more study. Here too charts of asset price are examined. The movement is referred to as pin bar or wick. Usually, when the pin bar moves downwards sharply, the price of anunderlying asset is likely to move up. Vice versa, if it is moving down gradually with short wicks, then it is liable to continue to be on adowntrend. Similarly, when the asset’s price is moving upwards, shorter spurts in prices are indicative of anupward trend, whereas sudden sharp spurt upwards indicates thelikelihood of the asset’s price slipping. This strategy is so named because the longer nose of Pinocchio and longer candle wick are anindication of alie regarding direction. Though it is a good strategy, it may not always be perfect. It requires stop loss that is significant and speed in taking decisions. Effectively when the wick is down “call” or “buy” direction is to be selected, and when the wick is up, “put” or “sell” binary option is to be selected. From a newbie’s perspective,much practice is needed in following this strategy, though once mastered, it can be quite fetching.

  1. Straddle Strategy

Traders use this almost in every market. But usually, this approach is applied when the market is anticipating some news related to the underlying asset of the binary option. What the traders do is, use “put” when the price is high, and use “call” when the asset price is low. This, of course, is the standard policy. But traders also use the reverse of it also immediately and alternately following the sale, anticipating sharp reversals of the trend. Any of the two trades could be bringing you the good results.

  1. Risk Reversal

This is similar to straddle strategy. Calls and puts are on the same asset. It is basically a defensive strategy meant for reducing risks if any. Profits are also lower. The difference between the two is that straddle is a continuous process, whereas risk reversal is done simultaneously.

  1. Hedging

Unlike risk reversal method, in hedging, two different assets are used, and calls or buys apply to one asset and puts, or sellsare applied to the other asset.

  1. Research and Analysis of the Fundamentals of the Asset

This is acrucial aspect of any trade, be it in thestock market, commodity market, or forex market. This is the most reliable part of the information and comprises almost 20% of the asset’s price movement probability.

Conclusion

There is no denying that binary options are a risky proposition. But risks can be reduced by setting aside the capital to be used for this. Effectively, that money may be deemed lost. Not more than 5% should be employed for each binary options contract. At the most, this may be extended to 10% of that allocated capital. Not more than 25% of capital should be invested in trades at any point in time.