Is it Possible to Deliver Superior Returns Trading Index CFDs?

What are superior returns?

First things first, what are superior returns in the markets? For many traders starting out, anything in the positive is a bonus and for many long term investors a return above 25% would be considered outstanding. Traders on the other hand are a different breed and expect much higher returns before they even consider them superior. 50 percent per annum for many traders would be considered a great effort and so we're going to suggest that anything above 50% is superior.

So how do we go above achieving this above average return?

Index CFDs provide the greatest leverage and the smallest margin for any CFD product in the market place. The critical aspect to achieving above average returns is generally using some form of leverage. Keep in mind, leverage is a double edged sword meaning your wins are magnified but so are your losses. So the key trick to delivering solid CFD returns is to find a strategy that is fully back tested and proven and that had minimal drawdown.

How a 20% strategy actually equates to a 60-100% return on investment

The beauty of Index CFDs is the fantastic leverage and your key is to build a CFD index strategy that gets a consistent return every year of around 20% unleveraged. Your next step is to identify what you worst drawdown is and begin to use leverage to assist you in making superior returns. If you can manage a 20% return on investment unleveraged with drawdown's of say 5% then you have a system that can benefit from trading at 3-5 times leverage. If you do that your cash on cash returns using index CFDs will range from 60-100%.

Experienced traders regularly trade at 5 times leverage or more but if you can sustain a 20% return and trade at 3-5 times leverage then you are looking at a 60-100% return and in my mind that is superior. Not only that but you can manage those successful returns with a drawdown ranging from 15-25%, which although unsettling is certainly within a reasonable ball park figure.

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