CFD & Forex Day Trading: Flexibility, Liquidity, Simplicity, Leverage

Day Trading describes the process whereby an investor trades a given security or financial instrument within a single business day. Closing their position in that period rather than holding it open overnight. This type of trading became particularly popular among individual investors largely thanks to the growth in the availability of the internet and home computers, that was seen in the late 1990’s and early 2000’s. The ability to trade from home or other remote locations encouraged many investors to take up trading full time. They choose Day Trading as style for its specific advantages and to limit their overnight risk exposure.

As the demand for access to Day Trading (and trading in general) grew specialist brokerages such Blackwell Global and its peers commenced operations to satisfy and service that investor demand.

Day Trading became most popular amongst investors in two specific markets. Which were Foreign exchange and US stocks and stock indices. More recently, since the advent of Smartphones and Tablets, the ability to trade from a mobile device has created a second wave of demand for Day Trading and many of these new entrants choose to focus on Day Trading Foreign Exchange.

Why Day Trade Foreign Exchange or CFDs

Flexibility

Forex or Foreign Exchange trading and trading CFDs appeals to Day Traders because of the flexibility that these products and their providers offer to them. The Foreign Exchange market operates on a global basis, 24 hours per day 5 days per week for example. Providing Day Traders with the opportunity to trade at a time and a place that’s convenient to them.

Liquidity

What’s more the daily turnover in the global forex markets, which runs into trillions of US dollars, (see BIS survey data) means that Day Traders are able to open and close positions almost instantaneously, under normal market conditions. Though it’s important to note that liquidity can be reduced and spreads widen over important economic data releases or during unexpected “force majeure” type events.

Simplicity

CFDs or Contracts For Differences allow Day Traders to speculate on commodities such as Oil and Gold and a range of international equity indices, across Asia, Europe and the USA.  Without having to make or take delivery of the underlying assets,unlike dealing in physical shares or commodities. Day Traders in Forex and CFDs can trade long (buy) or short (sell) with equal ease allowing them to benefit from both rising and falling markets and do this from either a desktop PC a Tablet, Smartphone or other mobile device.

Leverage

Finally Forex and CFD day traders can trade larger positions than their accounts might otherwise allow, through the use of leverage or margin trading. In effect their broker magnifies the size or their initial deposit lending the Day Trader the additional funds to allow them to control a larger position than they could otherwise afford.The broker charges its clients a rate of interest for this facility. However if the client’s positions are opened and closed within the same the business day then no interest charges will be levied* The use of leverage can magnify Day Trading profits but it can also do the same for losses.

*For further details about leverage and rollover interest charges please see our products pages Forex, CFDs and Precious Metals

Day Trading Strategies

Day Traders can use a wide range of trading strategies. Though most of these can be classified as either Scalping or Swing Trading. Scalpers are frequent traders who look to regularly capture small profits from the normal fluctuations in prices within Forex pairs and CFDs. Scalpers trade quickly and can be in a position for just a few moments. They close any trades that move against them for flat or as smaller loss as possible to protect their capital.

Swing Traders take a longer term view and are looking to identify and capture clear trends in the price action of an FX pair or CFD. They will trade far less frequently than their scalping colleagues but will look to capture a much bigger return per trade. They will use stop losses to limit their downside on a trade. But will also look to move this behind a trade to lock in a profit on the trade if they can.

Trading Software

Day Traders are well catered for at Blackwell Global which offers its clients access to Blackwell Trader MT4. A state of the art dealing platform that is perfectly suited to Day Trading. The platform contains a high quality customisable charting package. Charts can be drawn within 6 intraday time frames that range from 1 minute to 4 hours. Users can choose from line, candle or bar charts and apply a wide range of indicators and Technical Analysis studies. Swapping between instruments via a simple drag and drop functionality. Day Traders can also track their exposure and trade history within the platform.

The Blackwell Trader MT4 platform can be accessed from a desktop PC or an Android or iOS mobile device. Users can trade seamlessly across devices and be logged into their account from each device simultaneously.

Blackwell also provides its clients with access to its bespoke Infinitum back office platform as well as market reports and analysis from both internal and external analysts alongside an economic calendar that allows traders to plan ahead and track key data releases.

If you think Day Trading might be for you then why not open a trading account  ?