CFD Trading Strategies

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CFD Trading Strategies

CFD trading strategies refer to trading systems that can be used to trade CFD assets. There are several CFD asset classes: stocks, commodities, currencies, cryptocurrencies and indices. One of the factors that distinguish one CFD asset class from another is the trading hours for each asset class. Indices and stocks tend to be traded for only a few hours a day. They tend to present a lot of gaps on the charts from one trading day to another. Therefore, they will be excluded from the CFD trading strategy that will be discussed today, which is on the use of a customized Fibonacci indicator to pick out trade entries and exits on CFDs.

This CFD trading strategy uses the iFibonacci.ex4 indicator, which uses the Fibonacci ratios to plot both retracement lines as well as Fibonacci fans in an automated fashion, so that the CFD trader does not have to do this. This makes this strategy perfect for

beginners. The indicator also plots a single pivot line, Fibonacci arcs and other support/resistance lines as desired.

Chart Setup

Indicator: iFibonacci.ex5 (default setting) Time frame chart: 30-Minutes, 1-Hour, 4-Hours, CFDs: Forex CFDs, commodity CFDs and cryptocurrency CFDs.

Setup

Allow the indicator to plot the retracement lines and fans on the chart on its own. The indicator can be applied on several CFD charts so that the trader can take a trade on anyone that has shown a trade signal.

Entries

Several setups can be used to trade a long entry. Similar rules apply for short entries. Entries can be set up as bounces off the retracement lines or Fibo Zone (FZ) lines (which represent the fan lines). The following example is used to illustrate how such trades can be performed.

The following is a 15-minute chart for Bitcoin/USD. The iFibonacci.ex5 indicator has plotted on this chart, the following:

  1. Several Fibo Zone fan lines, corresponding to the Fibonacci numbers 38.2%, 50%, 61.8%. There is also a brown 0% line.
  2. The Fibonacci retracement lines corresponding to the Fibonacci numbers 38.2%, 50%, 61.8% and 100%. There is also a brown 0% line.
  3. A brown pivot line, which can be used as support or resistance, depending on where price action is coming from. In this example, price is coming from above so it is used as a support.

The essence of trade entry is to trade long off a bounce of price on either the FZ lines, the Fibo retracement lines or the pivot line. The trade examples shown are all long trades, so we will look for effective support areas to trade from.

Trade 1

The pivot support is formed when price failed to go below the pivot line, forming both a red doji candle and a hammer. Therefore, Trade 1 is to go long at point X, which is where the 38.2% Fibo Zone line intersects the pivot line. Having used the FZ 38.2% as the entry point, the logical exit level would be the FZ line above this, which is the 0% FZ line (shown on chart).

Trade 2

Following this trade, the next support is seen at the 61.8% retracement line (points A and B). Therefore the next long entry has to be at this level or close to it. This is formed at point C (pivot line support). A trade taken here has to terminate at any of the FZ lines above: 61.8%, 50% and 38.2%, in that order. Here, it terminated at the 50% FZ line.

Can you decipher possible entry and exit points on the EURUSD chart below?

If you can, then you have been able to understand one of the several CFD trading strategies that you can use.