• Hedging
• Pairs Trading
• Index and Director Trading Behaviour
• Speculative Short Term Trading

CFD Trading Strategies

Find out more about CFD strategies here

CFD trading is an alternative and often a hedge to traditional investment; there are many ways that you can use it to increase your profits and limit your losses. Here is a list of some common strategies used in CFD trading. Examples are provided to further explain these CFD strategies.

Going Long

When you go long you are buying the right to purchase the stock at some point in the future, at its current price. If an investor believes that a stock will increase in value, they can purchase a long CFD and then exercise the CFD once the stock price has risen.

The CFD brokerage company will then pay them the difference between the new, higher stock price and the old lower stock price.

This is basically the same as purchasing, holding and then selling shares. The only differences are that a CFD trader never actually owns any shares, they do not pay stamp duty and they purchase on a margin. They can therefore trade more shares, with less cash.

Going Short

This is the exact opposite of Going Long. CFDs were originally created to allow investors, especially large hedge fund managers, to bet on stocks that they thought would devalue. By purchasing a short CFD, you enter into a contract that forces the CFD broker to pay you the difference in share price if the shares go down in value.