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Trading Strategies Tutorial 2019

Active trading in the world of finance involves buying and selling assets with an aim to profit from the inevitable changes in market price that occur over time.  Essentially, the short-term and long-term trend movements visible on any market price chart create opportunities for traders to speculate on future asset values and to profit from their economic forecasts.  

Psychological characteristics associated with successful trading strategies might differ from the traditional “buy and hold” approach that is commonly used by passive investors focusing solely on long-term bonds or stock index benchmarks.  Instead, active traders work to identify opportunities generated by shorter-term price trends visible in both bullish and bearish market environments.  

CFD Highlights

Pivot Point Trading Tutorial

Strategies

The first question is what is a pivot? A pivot point is a technical analysis indicator, or calculations, used to determine the overall trend of the market over multiple time frames. The pivot point itself is simply the average of the high, low and closing prices from previous trading sessions. Once a pivot point has…

guide social trading 3

MACD divergence trading strategy

Strategies

Beginner traders often make the mistake in thinking that the more indicators they have the better their results will be, but this is not the case. Using too many indicators, or not knowing which indicators to use in combination with each other, can cause sensory overload, confusion and generate false signals. This guide will hopefully…

TD Line Breakout Strategy

Strategies

The difficulty in determining a pivot point in sentiment was accomplished by DeMark in creating an objective way to measure breakouts and breakdowns. DeMark created objective trend lines which can be used to create breakouts which will help determine if demand or supply is advancing. The proper construction of trend lines is the basis for…

Aktienanalyse

Connors RSI Trading Tutorial

Strategies

As a result, the Connors RSI can be a valuable tool which can be used to construct intra-day strategies with a high probability of success. Trading signals are generated based on indicator readings that fall between the values of 0 and 100. In general terms, indicator readings below 5 suggest asset prices are oversold (a…

guide forex 2

Momentum ‌Trading‌ ‌Tutorial‌

Strategies

First, traders must understand what the word “momentum” actually means in practical terms. For these purposes, a straightforward definition of the concept can be interpreted as follows: Momentum = Underlying Trend Strength Let’s consider the market price activity that’s visible in three different examples: In our first example, we can see a market showing positive…

guide cfd 1

Swing Trading Tutorial

Strategies

In many cases, swing traders will utilize fundamental analysis techniques in addition to their assessments of market trends and technical chart price patterns. However, swing traders tend to base their investment decisions on technical analysis strategies that identify new trading opportunities while they are still in their developing phases. Swing Trading Position Stances Swing trading…

Bollinger Bands Trading Tutorial

Strategies

Of course, these specific price measurements can be adjusted to fit the requirements of each person’s unique trading style. However, these are the defined parameters which were used when John Bollinger first made these tools available to the public in the 1980s. In the chart depicted above, Bollinger Bands can be seen bracketing a 20-period…

Ichimoku Trading Tutorial

Strategies

Designed by Goichi Hosoda in Japan in the 1960s, the Ichimoku system provides traders with additional data points when compared to traditional candlestick charts. At first glance, the Ichimoku Cloud (and the signal lines which make up its component parts) might seem like an overly complex piece of abstract art. However, once traders develop experience…

EMA Crossover Strategy

Strategies

What is important to understand about the EMA is that it does not work all the time. Asset prices trend only 30% of the time. Your risk management will play an important function in the success of an EMA crossover trading strategy. The goal, when using a trading strategy such as the EMA, is to…

guide trading

Day Trading Tutorial

Strategies

Successful day trading strategies aim to capitalize on the small price moves which characterize intraday trends. However, day trading can also pose many risks for those without a tested, though-out strategy. This is why it’s particularly important for investors to gain a deeper understanding of the common principles of day trading. In this article, we…

Relative Strength Index (RSI) Tutorial 2019

Strategies

In its most traditional applications, values below 30 are interpreted as undervalued (or “oversold”) while RSI values above 70 are considered overvalued (or “overbought”). These informative readings can be used to design trading strategies and alert traders to potential price reversals or corrective pullbacks within a larger market trend. Basics of RSI RSI is one…

Breakout Trading Strategy Tutorial

Strategies

When many people hear the term “breakout trading,” the first thing that comes to mind is a stock trend that rallies higher. However, these ideas can just as easily be applied to negative market scenarios (i.e. downside or bearish price breakouts) that can be accurately identified before establishing short-sell positions. Additionally, the technical analysis concepts…

Gap Trading Strategy Tutorial

Strategies

Expert traders are often able to interpret the true meaning behind these price gaps and capitalize on their occurrences as opportunities for investment. When used properly, price gaps offer favorable trade set-ups for experienced investors and open the door to substantial profit potential for those interested in active trading. For some background, it’s important to…

Scalping Trading Tutorial

Strategies

Scalpers typically employ technical analysis strategies as a way to identify potential trading setups. Some of the most common technical indicator tools used by expert scalpers include: Support and Resistance Levels Stochastic Oscillators Bollinger Bands Moving Averages Parabolic SAR Trend Analysis Since scalpers primarily focus on market prices, technical indicators will contain a high level…

Turtle Trading Tutorial

Strategies

Essentially, Dennis believed anybody could be taught to master the futures markets but Eckhardt was much more skeptical. Instead, Eckhardt argued that Dennis had years of training and experience that enabled him to beat the market and profit from his approach to trading. As a result, Dennis devised an experiment that could be used to…

Dividend Capture Strategy Tutorial

Strategies

The capture strategy is a two-trade system that is solely designed to allow investors to benefit from a stock’s dividend without encountering the risks involved when holding shares for an extended period of time. In any market investment, the longer an asset is held, the greater the potential it has to fall in value. This…

Growth Investing Tutorial

Strategies

The ability to successfully buy into a young company in its earliest stages of growth is a skill that can generate impressive returns if the business is able to deliver on its expectations. This central reason growth investing is particularly interesting for many investors. However, many of these companies are new and untested, so there…

Dividend Stock Investment Tutorial

Strategies

When investors are able to focus on solid and stable companies capable of making regular dividend hikes, the magic of compounding gains can turn a relatively small investment into a substantial nest egg over the long term: Unfortunately, many beginner investors lack a basic understanding of what a dividend actually is —and what it isn’t. …

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An active trader’s outlook is based on the assumption that intraday price trends offer enhanced profit potential that is capable of benefitting from positive and negative price trends.  However, various strategic methods can be used to design a successful approach to active trading in the financial markets. Here, we will look at some of the different asset classes that can be traded and highlight relevant factors that should be considered when designing a method to profit consistently when trading.

Trading Strategies Tutorial

Establish Consistent Trading Plans

Expert traders know that implementing a solid trading strategy can help remove unnecessary emotions from our investments.  This is why it’s often said that “failure to plan is a plan to fail.” Any unwillingness to obey a consistent trading plan is a mistake that can quickly result in losses that come as a result of bad decision-making. 

There are five key elements to consider when defining a successful trading strategy: 

Asset Classes:  The term “asset class” simply refers to the type of instrument you will be trading.  Popular examples include CFDs, cryptocurrencies, foreign exchange (forex), commodities, stocks, and options.

Trading Style:  What’s your trading style?  Common choices include swing trading, day trading, scalping, position trading.  Deciding on the best approach depends on how much time do you have to devote to trading activities each day.  For example, scalping strategies are very different from swing trading strategies, so it’s important to know what you want to accomplish before you commit to any single approach.  Knowing your true trading personality means understanding your limitations as well as your strengths.

Time Horizons:  To construct an active trading strategy, you must select a time horizon upon which to base your position.  Trading strategies that utilize 5-minute charts tend to differ from strategies that base position stances on weekly charts.  Traders must be able to access charts reflecting each specific time period and these can be found via the software platforms made available by your market broker.

Technical Charting Tools:  Always know what’s available in your trading toolkit.  Nearly all of today’s best trading strategies involve charting and technical analysis, so figure out which indicator tools you plan to use and which price patterns you feel you can master.

Trading Plans

Risk Management:  Know common risk management techniques. Develop position size based on clearly defined risk/reward ratios and set strict rules for how much capital you’ll risk on each individual trade. Understanding the proper ways to use strategic stops can help to prevent catastrophic losses in the future.

 

 

 

 

Pivot Point Trading Tutorial

Pivot Point Trading Tutorial

General
Your goal as a trader is to acquire equity in the market at a price that you can exchange in the future with another market participant at a profit. In trading the goal is to be able to pre-determi [...]
MACD divergence trading strategy

MACD divergence trading strategy

General
One of the most popular indicators available to traders today is the MACD, which stands for Moving Average Convergence Divergence. In this trading guide, I will show you how the MACD can greatly im [...]
TD Line Breakout Strategy

TD Line Breakout Strategy

General
The TD (Thomas DeMark) trend line breakout strategy was introduced in the book “The New Science of Technical Analysis” which was published in 1994 by Thomas DeMark. This article is a step by st [...]
Connors RSI Trading Tutorial

Connors RSI Trading Tutorial

General
The Connors RSI (CRSI) is an indicator used in technical analysis which was developed by Larry Connors.  The indicator itself is actually a composite of three individual components: The well-known [...]
Momentum ‌Trading‌ ‌Tutorial‌

Momentum ‌Trading‌ ‌Tutorial‌

General
Momentum trading is a financial market strategy approach that is capable of capitalizing on the total rate of movement present in the underlying price of a security.  In essence, momentum is the s [...]
Swing Trading Tutorial

Swing Trading Tutorial

General
Swing trading is an approach to financial investing which aims to capture profits in stocks, forex, cryptocurrencies (or any other financial market asset) over time periods that span just a few day [...]

Stock Trading Strategies 

Equities market strategies are suitable for both long-term “buy and hold” investors and short-term traders. Depending on which you are, you will always be able to find a wide variety of tools available to help you develop a successful strategy. 

Stock Fundamentals:  Many stock traders use fundamental analysis techniques to identify equities that fit a particular style of investing; typically those that are undervalued based on their fundamentals, those that provide good dividend income, or stocks with the potential for long-term growth in value over a particular timeframe. There are literally hundreds of thousands of stocks available in the equities market, so stock picking strategies are extremely important. 

Screening Tools:  Finding specific companies that fit your trading style and meet your investment objective might be perhaps the hardest part of the job for any stock trader. Common screening metric include figures like the price-to-earnings ratio or price-to-book value.  Be sure to choose a broker offering superior stock screening tools that enable you to compare a company to peers in its industry sector and against the trends seen in the broader market. 

Market Liquidity:  Intraday trading requires precise timing of position entry and exit points.  Typically, it’s much easier to get in and out of stock positions at a preferred price when high trading volume is present.  It’s important to consider market depth, as well—what’s the liquidity at different price points (above and below the current market price)? The answer to this question can help determine which stocks we best-suited to new trade entries.

Price Volatility:  Stock positions need price movement in order to generate gains, so equities traders often look for stocks that make consistent price moves of at least 3%-4% each day.  Depending on the stock’s share price, these moves can produce substantial profits or losses, so always adjust your position size based on the relative value of current market prices.

Crypto Trading Strategies

Traditional investors often argue that cryptocurrencies qualify as the riskiest and most volatile asset class.  Currently, the cryptocurrency market is poorly regulated, contains assets with no intrinsic value, suffers from thin order books and a lack of institutional investment, and is highly susceptible to hacking.  In other words, if there’s any market that requires a tested and disciplined trading approach, it’s crypto. 

Most cryptocurrencies trade against bitcoin (as opposed to a fiat currency). Given the fact that bitcoin is extraordinarily volatile, market experts often argue that developing a consistent crypto trading strategy is even more difficult when compared to the other major asset classes. 

A crypto trader’s first step is to choose the proper trading vehicle.  For anyone that doesn’t want to deal with the hassle of obtaining a digital wallet and holding the actual digital currency, there are cryptocurrency options, crypto futures, and crypto CFDs.  One of the main challenges with crypto trading is that it’s still a relatively new development in the world of finance. New ICOs continue to happen all the time—and cryptocurrencies disappear regularly.  Moreover, cryptocurrencies tend to have low trading volumes, so liquidity is another issue to consider.

Common elements of a successful cryptocurrency strategy include: 

Asset Diversification: Trading different cryptos reduces the risk associated with any specific coin. 

Minimize Trading Costs:  Select a broker with low fees; most crypto traders open and close multiple positions a day. 

Technical Analysis:  Test trading strategies using different technical indicators.  Using at least two technical indicators can help confirm trading signals as they develop.

Risk Management:  Set stop losses at a price level that creates a profit ratio of at least 3x on each position.  Given the enhanced volatility seen in crypto markets, stop losses are an absolute requirement on every trade.

Crypto Broker Highlights

CFD Trading Strategies

Contracts for difference, or CFDs, are derivatives—in other words, the instrument derives its value from an underlying asset.   Rather than owning the asset, CFDs make it possible to profit from price movements seen in its underlying value. CFDs are also leveraged instruments, so trading strategies must include the use of protective stop losses.

Successful CFD trading strategies include several essential parts: 

Leverage Control:  Leverage of 50:1 is not uncommon in the CFD market.  As a result, the market’s outsized profit potential is extraordinarily tempting to novice traders.  However, the potential for loss is equally great—and no one wants to deal with margin calls on trades that go bad.  Start small and limit your exposure; new traders shouldn’t employ leverage beyond 3:1 during the first year of trading. 

Capital Preservation:  Most CFD traders focus exclusively on making money.  But it’s equally important, if not more so, to focus on protecting available capital.  All trading strategies need tight stops, but it’s especially important for leveraged instruments.  On a long enough time horizon, any trading strategy without a stop loss is destined for failure. 

Macro Analysis:  CFDs are available in many different asset classes and this requires an understanding of macroeconomic analysis.  For example, if you’re not an expert on the ways commodities prices respond to inflation, your success rate trading commodities CFDs may be hampered.  When you are just starting out, stick to asset classes you know best.

Forex Trading Strategies

Forex traders speculate on upcoming price movements in foreign exchange markets. Currencies trade in pairs; the top currency pairs are euro/US dollar, US dollar/Japanese yen, British pound/US dollar, US dollar/Canadian dollar, Australian dollar/US dollar, US dollar/Swiss franc.  Forex markets are active 24-hours a day and represent the world’s largest forum for active trading. As a result, forex is ideal for traders who want to trade outside normal business hours.

Forex is also particularly well suited to scalping; you can move in and out of the market many times a day and profit off tiny movements, or pips, in currency prices. Of course, scalping requires a larger time commitment when compared to other popular trading styles (i.e. position trading or swing trading). You can trade forex on the options futures or spot market.  Each venue offers specific advantages that may help to determine your ultimate trading strategy.

Successful forex strategies generally include these elements:

Time Horizon:  Do you prefer to be working with 5-minute charts, hourly charts, or daily charts?  In other words, what’s your trading style? Different types of forex strategies tend to work best on specified timeframes.

Technical Indicators:  Technical indicators help forex traders to identify a trend direction.  This is why all-purpose tools like MACD, stochastics, and moving averages can be an invaluable component for any forex trading strategy. 

Entry and Exit Points:  Forex traders must identify price levels that determine to enter and exit the trade—and set stops to ensure you follow through. 

Backtesting: Trade your new strategy on a demo account to make sure it works before applying it to your live account.

Options Trading Strategies

Options give the holder the right (but not the obligation) to buy or sell a particular underlying instrument at an agreed-upon price up until a preset expiration date.  Options traders have access to a wide variety of underlying assets (equities, indices, ETFs, forex, commodities, crypto, futures, and other derivatives).

Options are leveraged instruments, so trading strategies must protect against the risk of potentially limitless losses.  Options trading techniques range from basic strategies (i.e. buying calls and puts) to more complex protection and enhancement strategies.

Generally, options strategies fall into one of four categories:

Calendar Strategies:  Capitalize on the advantages of time decay.  These strategies are complicated and highly variable, so strategies must be monitored closely (and are often closed-out manually). 

Vertical Strategies:  Initiate small bets on a large market scale.  An options trader sells puts at a lower price and simultaneously buys puts at a slightly higher price while collecting the premiums. 

Algorithmic Trading Strategies

Enhancement Strategies:  Allow options traders to profit assets that are already part of an investment portfolio.  By writing covered calls or covered puts, options traders keep the options premium—and if the predictions are correct, you keep the underlying assets, too. 

Protection Strategies:  Hedge against risk within an existing investment portfolio. For example, if you’re long on a stock and you want to protect your profit (or if you believe prices will reverse), buying protective puts can help to lock in gains should your predictions prove correct and prices move against the position.

Once you know the objective behind your options trading, your next step is to determine your risk tolerance. The riskiest options trades include buying a large quantity of deeply out-of-the-money (OTM) options contracts or writing naked calls.

Demo Accounts: Trading Strategy Backtests

Backtesting involves using historical data to recreate trades that would have occurred in the past.  Whenever traders are adopting a newly developed trading system, expert traders consider backtesting an essential part of the process in crafting an effective strategy.  Backtesting is a statistical analysis that employs specialized backtesting software. Before deciding to backtest a trading strategy, keep the following tips in mind:

Test Different Time Periods:  Make sure your strategy works in both bear and bull markets. Additionally, gain/loss metrics can help traders narrow down optimal position sizes within the strategy.  

Assess Risk:  Trading systems are only effective if they can outperform other investments at or below an equal level of risk.  Fine-tune your backtesting by mimicking commissions, fractional lots, margin requirements, trailing stops, and tick sizes to get the most accurate results while minimizing risk. 

Beware of Over-Optimization:  When results are tuned too tightly into the past, they may not work in the future.  Backtesting isn’t always 100% accurate, but as one more tool in the evaluation arsenal, it can help you determine if your new trading system is capable of achieving your investment goals.  Always test a backtested strategy with a demo account before taking it live. 

Trading Strategy Backtests

Algorithmic Trading Strategies

Automated trading systems (also known as algorithmic strategies) allow traders to use software programs to set predetermined price parameters for trades.  Once activated, trade execution is handed over to the system’s algorithms. In most cases, traders will establish a set of rules for specific technical indicators, input order types, profit targets, and stop loss parameters and the system’s trading “bots” will execute trades once all of these criteria are satisfied.

Advantages of algorithmic trading systems:

  • Objective positions and enforced discipline
  • No need to actively monitor trading stations
  • Increased order entry speed
  • Remove emotions from trading decisions
  • Superior trading consistency

Disadvantages of algorithmic trading systems:

  • Requires extensive backtesting
  • All positions stop if trading platform loses connectivity
  • Difficult to monitor trading losses
  • Rarely successful on first attempt
1
of 29 Forex Broker HYCM
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Max. Lever 1:500
Trading size Micro-Lot
Minimum deposit $ 100
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Risk warning: Capital can be lost. Terms and conditions apply.
2
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Currency pairs Currencies
Max. Lever 1:30
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Risk warning: Capital can be lost. Terms and conditions apply.
3
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Currency pairs 60 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 100
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Risk warning: Capital can be lost. Terms and conditions apply.
4
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Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 250
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Risk warning: Capital can be lost. Terms and conditions apply.
5
of 29 Forex Broker GMO Trading
Currency pairs 60 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 250
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Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 ETF Broker IG
ETFs w/ discount 1200
Custody fee 0 GBP
Min. deposit £ 0
Trading from 5 GBP
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74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

2
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3
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4
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5
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1
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National fees £0.00
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Risk warning: Capital can be lost. Terms and conditions apply.
2
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National fees £7.99
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Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
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74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

4
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5
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1
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Risk warning: Capital can be lost. Terms and conditions apply.
2
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3
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Risk warning: Capital can be lost. Terms and conditions apply.
4
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FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 250
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Risk warning: Capital can be lost. Terms and conditions apply.
5
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FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit $ 100
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Risk warning: Capital can be lost. Terms and conditions apply.
1
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2
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3
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4
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5
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1
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2
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3
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4
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5
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1
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2
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Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
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74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

4
of 9 Spread Betting Broker Core Spreads
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5
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
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Risk warning: Capital can be lost. Terms and conditions apply.

Conclusion

In order to achieve consistent success, having an active trading plan is absolutely essential.  The rules of a successful system should be honored and obeyed, yet open to flexibility and reevaluation should market conditions call for adjustments.  A practical trading strategy takes into account each trader's personality style, risk tolerance, and individual investment goals. The ability to know when to close a trade is as vital as it is to know when positions should be opened.  Stop loss levels and profitable price targets should be included as part of every trading plan in order to ensure proper risk-reward parameters are in place.

If any trading system lacks preparation or employs flawed techniques, long-term success is unlikely.  However, when implementing the proper research and forethought, anybody can develop the skills required to beat the market and achieve strategic results that are consistently profitable.