CFD trading is the term for”contract for difference”; it is a contract between two parties; a “buyer” and a “seller”; they agree that the “seller” will pay the differences between the current value and the value at the contract time.
The “buyer” will receive a profit if the price is moving upwards during the contract period; is the price moving downwards the buyer will lose his money on the contract.
CFD trading is common in the financial market; some of the market areas are the Forex and stock market; other market areas are commodities and the indices market.
The mindset in this article is on trading Forex and shares in connection to CFD trading. The first part is a short description of the two market areas and the second part is trading with indicators.
The Forex market
In the last couple of years the world economy has been in a financial crisis and the crisis has had an impact on the prices in the financial world. One of the currency pairs that have been moving mostly is the EURUSD; since august 2011 the EURUSD has been moved from 1.4400 to 1.2200 in July 2012 and the currency pair is still moving heavily. In the first quarter of 2013 the EURUSD has been bearish from 1.3300 to 1:2800.
The Stock market
Reverse the stock market has been moving in the other direction; In the United States the Dow Jones has set a historical record in 2013 as the Dow Jones index has been at its highest since 1913. The reason is that the economy in the Unites States have been in a systematic recovering from the world crisis and have given hope that the economy in the United States is in a healing process.
Trading with indicator
The historical description of the stock and Forex market illustrate that the stock market has been on a rise and the Forex market represented by the EURUSD is volatile.
Some traders in the in CFD market have chosen to trade with indicators. The advantages are that they do not have to know if the economy is in a crisis or in a recovering as the indicators they use will decide when they will enter a trade and when they will take the profit in a trade.
One indicator is the MACD indicator; it is an indicator that gives information about the trend in the market; the indicator consists of the MACD line and a signal line; a change in the trend accords when the two lines cross each other. The MACD indicator is illustrated in the video on this link.
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