The CFD trading platform is designed for "fast traders", i.e. people who prefer to close trades as fast as they open them. With CFDs it is very difficult to hold a long term position as they are limited by time limits. Increasing these maturities requires a commission, which can be very high.

Essentially CFD, it is a tool that a trader can use to trade or speculate on price differences without having to purchase the underlying asset itself: a stock, futures, metals or commodities.

How do I trade with CFDs?

A CFD trading platform is used by investors to bet on whether the price of an underlying asset or security will rise or fall. 

How does trading on a CFD platform work?

Suppose a contract requires the seller to pay the buyer the difference between the current value of the goods and the price at which it will change after a certain period of time. That is, the buyer expects the price of the commodity to rise in a certain period of time. If his calculations are correct, he benefits from the price difference. If his calculations are wrong and the price goes down, the buyer has to pay the difference. Thus, CFD trading allows you to open both long and short positions.

The most unique answer to the question of how a CFD trading platform works is that it is a tool which can help people lock in profits even when the market is falling. That's right, if a trader predicted that the market would go down and made a "short" trade, they would still get some payout. 

Choose stocks for investment
Choose stocks for investment

Trading platform capabilities for trading CFDs in New Zealand? 

CFD trading in New Zealand, like all financial instruments, has its drawbacks and positives. Let's look at them in more detail. 

Advantages of CFD trading platform:

  • Profits from falling markets. One of the biggest advantages of CFDs is that traders have the unique ability to capture profits even when the market is falling. All they need to do is just "register" their forecast in the system, and if it turns out to be correct, they make a profit. 
  • Trading stocks and commodities on margin. Margin trading. Is an advantage for experienced traders, but not for beginners. Basically, it allows a person to buy or sell much more than what is in their account. 
  • Variety of assets. Virtually any financial asset can be traded through CFDs, making it much easier to diversify your portfolio. In some ways, some traders consider it the best way to diversify their portfolios. 
  • Open long or short, or buy and sell positions. In the CFD market, there are usually no short selling rules. The instrument can be shorted at any time. As there is no ownership of the underlying asset, there are no borrowing or short position costs. In addition, when trading CFDs, there are no commissions. 

Disadvantages of CFD trading platform:

  • Timing. For each position that a trader opens, there must be a deadline. Usually it is a week, but there were cases where people were given only 24 hours to close their trades. If a trader fails to close their trade before the deadline, it will automatically be closed regardless of whether they are in a good or bad position. The only way to postpone the deadline is to pay a commission.
  • Cannot have long-term positions. Traders cannot have long-term positions. Well, you still can, but you will have to postpone the deadline again and again. 
  • Leverage. It can happen that CFD trading with leverage can bring a trader much more loss than they would have lost without the leverage.

To make a trade on a CFD trading platform, you need to use quotes, indicators and technical analysis charts. Each chart and indicator shows the price fluctuations of a single financial instrument.

Correct interpretation of signals can have a positive effect. Before using an indicator or a chart, you should understand how they work and the methodology of their calculation and reading. Be persistent and you will succeed!

In the foreign exchange market, a quotation defines the price of currencies (as well as securities, commodities and other stock market assets) in the market at which, at a given time, the seller is willing to sell a particular volume of an asset. Usually, a quotation is a volatile, changing value. Quotations are formed on the basis of many economic and political factors: interest rates, inflation rates, political stability, etc. Moreover, news releases correct the price in real time, which can be seen on a chart of the asset.

Best online trading
Best online trading

On a CFD trading platform, stock charts are one of the most important tools for analyzing current market conditions and predicting future price behavior. They help to determine the potential of growth (or decline) of the analyzed instrument in order to make a decision about entering the trade. They begin the study of technical analysis. 

There are three main types of charts used in stock trading:

  • Linear: builds on the closing prices of the selected timeframe.
  • Bars: they show additionally the opening, maximum and minimum prices that were reached during a given period. Depending on the selected timeframe, a single bar will show the same data. If the chart is a daily chart you will see one bar represent one day, if you have a weekly chart you will see one week, etc.
  • Candlestick chart: A chart view with additional data about price movements over the time period (opening and closing price, maximum and minimum price value for the trading session). A green ticker indicates a price movement upwards and a red ticker indicates a price movement downwards.

Technical analysis indicators in the CFD trading platform play an important role in the work of the modern trader. A trader just need to know how to interpret readings of such a chart, in order to extract from them reliable trading signals to buy or sell the financial instrument in question.

The indicator signal is an indication that there is likely to be increased market activity in this range, whether by beginners or professionals. Therefore increased attention should be paid to such ranges. Major types of indicators include the moving average, RSI indicator, MACD indicator, Bollinger lines, ADX indicator, etc.

The whole purpose of charts and indicators is to facilitate the analysis of huge amounts of information. It is worth learning to understand the technical analysis tools on the best CFD trading platform in New Zealand. Know how to combine their readings with other market factors. Try it, and you will succeed!

How to make money trading CFDs in New Zealand?

Strategies on the CFD trading platform allow systematic profitable trading. Only those who follow a clear trading system are able to earn consistently on the exchange. The strategy allows you to track and correct mistakes. It will help an investor to see the weaknesses of his trading system and correct his approach to trading.

Without a clear strategy, trading on the stock market turns into chaos. Trader's decisions become random, so he stops to see systematic mistakes. Without rules and limits the trader falls into emotional trading which inevitably leads to failure.

Commodity trading
Commodity trading

It is possible to distinguish the following approaches to trading in the exchange market:

  • Intraday trading (intraday or day trading). The trader never rolls over the position to the next day. Most frequently, volatile products with large swings are selected for trading on this strategy, while the total duration of a deal is often several minutes. Very often, intraday trades involve borrowed funds. They are repaid to the creditor on the same day, allowing no interest to be paid.
  • Positioning. Transactions are made with the objective of generating a movement of 10-50%. Usually made every few months. This approach does not require much time and really brings profit to traders.
  • Scalping. Super short trades. Based on the difference between the buy and sell price. The scalper buys securities at the buy price and immediately opens a sell position by specifying the bid price. A scalping trading strategy requires a calm market. It is important that there are no sudden upward moves or breakdowns.
  • Swing trading. It presupposes holding a position for more than one day. Accordingly, a stock is bought at the low point and sold after the price rises. The most popular instruments in swing trading strategies are liquid securities, which are quickly converted into cash.

A trading strategy is a collection of rules that describe when to sell and when to buy. According to them, a trader must make transactions in the stock market.

Active strategies can be divided into two types:

  • Trending (transactions are opened in the direction of movement);
  • Counter-trending (trying to find the reversal points).

The time of strategy use is also important. For example, it is better to use trend options than counter-trend options during the periods of trend movements. But it is impossible to know in advance if a trend is about to occur.

To trade on a CFD trading platform successfully, it is important to develop the psychological component, to estimate the risks which everyone is ready to undertake. Another important aspect is experience that can be gained only in the process of trading.

How to start CFD trading in New Zealand? 

To start trading CFDs you will need to open a brokerage account from which you will make purchases - it will not only hold the money but also other assets purchased during the trade.

Once you have chosen a broker you need to register online. When registering, give your real details. Immediately after registering, you will have access to all the broker's services. Before you can open your first trade, you will need to fund your brokerage account. It is easy and free!

Registrating on the investing platform
Registrating on the investing platform

Nowadays, practically any payment system can be used to make a deposit in cash. This is usually done as follows: you go to the website of the broker where you intend to trade. Once you click on the "Deposit" or "Deposit" button, you will be offered one of the various payment systems.  

If you are new to the stock market, we recommend opening a demo account to trade with virtual money, not real money. The option of opening such an account is available on the best CFD trading platform in New Zealand, which is interested in creating the most favorable conditions for beginners. 

How to open account
How to open account

By opening a demo account, a trader may get access to all the possibilities of trading on the CFD platform, understand all the intricacies of the process and try to make transactions without the risk of losing money. Only a competent trading system can give confidence in trading! Try it and have a successful trading!

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