Excellent trading strategies for CFD traders in Dubai

Joseph B. Hash
4 Effective Trading Indicators Every Trader Should Know

CFDs are financial derivatives that allow traders to take advantage of differences in rates between brokers without physically owning an asset. Meaning that when trading with CFDs in Dubai, for example, with CMC Markets, you can profit whenever the value of an underlying asset changes without having to worry about holding the asset itself. 

Traders are essentially buying on margin – using leverage. It allows them to trade more significant amounts than what they would generally be able to, using their own money. For example, if one bitcoin costs $100 and is worth $101 at some point during the day, then any trader who owns one bitcoin could sell it for $101 and make a profit of $1. 

If they had their bitcoin available to them simultaneously, they would have made a 100% return on investment. Unfortunately, most people don’t own one bitcoin. Traders “buying” with CFDs don’t buy anything – instead, they are simply speculating that the price of an asset will rise or fall based on market events.

When trading CFD in Dubai, you can use various strategies to increase your potential returns from the market.

Swing trading

Swing trading is the process of holding an asset for a time frame of around five days or more. It involves identifying stocks that’s price moves up and looking to buy them close to their high points before they begin dropping again, which you can either sell at a profit or wait until they have risen once more. You still have to be careful. 

Suppose you are waiting until after the price has dropped. In that case, it may never recover, but being able to identify signals which indicate this means that you can potentially hold your investment until it rises even higher than its peak before selling.

Arbitrage

Arbitrage essentially means “risk-free” trade – getting an equal investment return with no risk involved. For example, if you are trading using US dollars to buy GBP in the United Kingdom, you would be taking advantage of the difference between the two currencies. You can also do this within companies. For example, stock in Apple may vary in price between markets even if it remains in the same company.

Hedging

Hedging is when traders take advantage of events that reduce volatility in an asset by buying it or selling it short. For example, suppose a trader owns one bitcoin, and an event takes place which causes it to drop in value but not affect other cryptocurrencies. In that case, they could get rid of their existing bitcoin without losing out on any money since all other cryptos will still be worth exactly what they were before.

Margin trading

Margin trading is effectively CFDs on margin, where traders can borrow money to buy an asset without using their funds. They can still use the total value of an investment even if market events have reduced it. For example, a trader who had spent $100 on one bitcoin may be able to sell this at its reduced price and still have access to another $100 to buy more bitcoins or hold onto them until they rise again. However, this strategy does carry some risks since if a trade reduces in value rather than increases, you will lose out overall.

Index funds

Index funds are another form of arbitrage that takes advantage of differences in prices between markets – but instead of doing so by buying and selling individual assets, it does so by making investments in a variety of different companies. Suppose you are trading CFDs on index funds. In that case, you must be extremely careful since any event that causes one or more of the companies within an index fund to drop dramatically will end up affecting the value of your investment as well.

Long term investment

Long term investment involves traders simply buying shares in an asset that they believe has potential for growth and holding them until this potential becomes realised – often involving selling once the value begins to rise again after a period where it has gone down. It may be considered as another form of holding until prices rise again. However, since the asset may rise much higher than its original purchase price, it can mean that your potential returns are far more significant.You can trade CFDs through Saxo Bank UAE.

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