Index CFDs are by far one of the most popular Contracts for Difference products on the market today and for very good reason. They allow you to control large positions for a very small outlay, they are usually commission free and all CFD brokers give you access to free data with live prices and charting. Whilst all of these points tick the right boxes it still best to have a sensible plan when starting out.
Establishing the right mindset and purpose when trading Index CFDs
As with any project or new field of study, it is critical to have clearly mapped out goals before you jump in. Index CFDs allows incredible levels of leverage and most Market Maker CFDs brokers like CMC Markets allow 100 times leverage or 1% margin. So it is not uncommon for positions to get out of hand if the proper procedures are not put into place.
Can I trade the Index CFDs for $1 per point?
Fortunately companies like CMC Markets allow you the chance to trade the Aussie 200, Nasdaq or FTSE at $1 per point, which is the smallest possible contract size. Contrast this with a proper futures broker, who has a minimum of $25 per point for say the SPI 200 and you begin to see the flexibility of trading with a Market Maker CFD broker.
Given that some CFD brokers allow you to start out for as little as $1 per point, this is where your initial sensible trading plan is going to come into action. Take advantage of the $1 per point and trade as small as possible whilst you build the skill set to get larger if and when the time warrants it.
Set your goals around a basic CFD Trading System
So your initial goal is to trade the smallest possible contract size whilst you are testing the merits of your CFD trading strategy. At $1 per point you aren’t going to find anything cheaper anywhere else. So begin by setting your initial entry, exit and money management plan and get in the market knowing your potential downside is largely limited due to your smart money management and stop loss strategies.
100 points per month then scale up
You might even want to set initial targets of say 100-200 points per month. The greatest advantage of trading index Contracts for Difference is the amazing scalability you get access to which means if you begin making 200 points per month at $1 per point then isn’t it possible to take that successful system and trade at say $5 per point and make 5 times the reward? Of course it is and that’s the beauty of trading index CFDs.
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