Saturday, March 21, 2015

What is CFD Trading System

CFD traders frequently trade with a trading method.

This is simply not to say that all CFD trading-strategies are mechanical and that discretionary techniques don’t perform as well. In fact there are lots of types of systems around. Many are purely mechanical and can be created and back-tested over historical information.

A few other systems are part discretionary, though this particular doesn't mean that there is no organized approach. Though these systems might not be 100% mechanical, there continues to be a step by step systematic approach which is used.

What Exactly Really Defines A CFD System?

A investing system is basically a set of guidelines.

With purely mechanised systems, you can literally write the whole plan down (since it is mechanized, and a CFD either passes your guidelines, or it doesn't).

Of course, previous results as shown by back-testing applications do not guarantee future overall performance.

What A CFD System Really Does?

A trading program can measure (historically and live) these types of three things:

A profit-loss ratio

The profit-loss proportion is the size of the average revenue compared to the size of the typical loss. For example, if your average revenue is $500 and you average loss is $250 your own profit loss ratio is 2.

Note that there’s an identical term called the win-loss ratio, which is the number of wins there are compared to losses. In case you only have 35% winning trades and 65% losing investments, resulting in a win-loss ratio of 0.54 (35/65).

You increase the profit-loss ratio, with the win-loss proportion, to get the so called success ratio. Again, with backtested results, keep in mind that past results does not assure future results.

Draw-down

If the traditional drawdown is a certain amount, there is no make certain that future draw-down will be the same or less, as possible more.

Smoothness of Equity Shape

When results are constant, the equity curve is smoother and in some cases, the draw-down is smaller as well. But every system is different, so look at the regularity as well as all other parameters including drawdown.

So let’s have a look what a investing system specifies:

Issue #1: What Tools You’re Trading?

For example, are you currently trading CFDs on a particular market?

Issue #2: What the Access Conditions are?

That is, what needs to happen for you to enter a CFD. For example, techniques may use price action or indicators. Some other systems use chart patterns which are either mechanical (black and white) or discretionary.

Issue #3: What their Exit Conditions are?

That is, what needs to happen for you to exit a trade. For instance, you may use an initial stop and a walking stop. When you enter a long exchange at say $5.50, you may set a preliminary stop, so that if the trade goes from the direction of the trade and trades at or beneath that stop, then you would be exited through the trade.

The trailing stop is a quit which moves as the trade gets into the direction of your trade (up for long trades), to safeguard your profits, and also eventually leave you when the trade eventually turns back again against the direction of the buy and sell.

You should seek your own monetary advice before trading.

Issue #4: When Should You Review the System?

Part of investing is deciding when to review your program to check that it's executing as expected. After a period of time, or after a particular draw-down or other criteria, it's time to measure the performance. If necessary, you may need to determine why the system has not performed not surprisingly and if there's a reason for it.

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