CFDs

Algorithmic Trading

In most cases, by using algorithmic trading, the need for human intervention and review of orders to buy or sell securities completely disappears. The mathematical models for computer decision making on stock markets have built-in rules for determining the best time to place orders and start transactions without producing strong effects on share prices. Algorithmic…

Alpha

The alpha is calculated by going back to the past performance of the shares, expressed in excess returns, and its calculation is derived from the formula: Ri= a+bRm To exemplify, assume a stock has a return of 25 percent. From this return 5 percent represents the short-term interest rate, which leaves an excess return of…

Limit Order

The ‘limit order’ is the most popular order type, since it lets you specify the price at which you want to buy or sell a CFD and involves lining up in the queue with other traders. Execution of a limit order occurs when the market passes through your chosen price. The important point to remember…

One Cancels Other (OCO)

The One Cancels the Other (OCO) order does just that; if one order is executed, the second order is cancelled. Effectively it means that you place two orders simultaneously, but run with the trade that triggers first. Let’s say a trader wants to do one of two things; either go long (to buy) Westpac CFDs…

If Done Order

Kind of like trading on automatic pilot, the ‘if done’ order involves placing two sequential trades ahead of time. As the name suggests, the second order doesn’t become active until the first order is executed. As an example, let’s say you placed a ‘limit order’ to sell 2000 XYZ at $6.90. Since you will lose…

International Shares

Imagine the difficulty of buying shares that are trading in France, Germany, Turkey or Portugal. Even the process of purchasing shares trading on US exchanges can be onerous, involving realms of paperwork, not to mention hefty international brokerage rates as high as $100 a trade. CFDs allow you to trade international shares with similar ease…

Margin Call

Trading with leverage, or margin, introduces a rather unwanted friend to the trading table, commonly referred to as a margin call. The problem with highly leveraged CFDs – in contrast to using a margin loan to buy shares – is that margin calls are typically more frequent when trading CFDs. Small moves in the price…

Market Maker CFDs

With the market maker CFD model, CFD trades aren’t always hedged in the underlying market. What happens instead is a synthetic market is created. This means that you will be quoted a Bid and Ask (the difference between the two quotes being the spread), and the liquidity for you to trade.  The standout benefit of…

Day-Trading

Day trading is the practice of taking small bites, or profits, out of the market. A day trader would look to profit from a price move from say $6.20 to $6.22, $6.34 to $6.36 or $6.64 to $6.66. Positions are rarely held overnight but are sold before the market close, and possibly even re-purchased the…

Fundamental Analysis

The fast-paced nature of CFD trading tends to propel traders towards using technical analysis techniques to determine when to buy and sell, but this could be a flawed strategy. While technical analysis per se isn’t bad, combining technical and fundamental analysis is often a better approach. If there is a technical signal to buy, it’s…

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