Financial Gaming Guide

As with all derivative instruments, CFD trading also comes with a platform or a trading system. It is important to understand the trading system while trading CFD’s and many investors make the mistake of ignoring this aspect. There are basically two kinds of trading systems – mechanical and discretionary, both are different and understanding them would greatly enhance an investor’s performance while trading CFD’s. A trading system used in CFD trading is basically  set of rules which are to be adhered to while managing CFD trades.
This article deals with explaining the above type of CFD trading platforms and how choosing a proper platform can change the outcome of a CFD trade.

Mechanical trading systems:

Choosing the mechanical trading system has its own set of advantages. This choice will allow an investor to put on paper what his or her expectations are from a particular CFD trade. The trading system will be programmed to reject the CFD’s that do not meet the expectations. For example, if you are eliminating trades that have not crossed a weekly high, all such trades will be eliminated. Using this trading system, the investor can weed out a lot of hunches and guesses.
There are a lot of software programs that support the mechanical CFD trading system and the most used are the WealthLab and the TradeSim. Entering these criterion into these software will let an investor see how these criterion have performed over a said period. This ensures that an investor gets the opportunity to test the system and analyze the data before putting in a trade. Strategizing the CFD trade depending on these criteria will certainly increase the chances of winning.

Discretionary trading systems:

This is a semi-mechanical trading system and it still has a clearly defined approach to trading. A discretionary CFD trading system has been proven over time and allows an investor to look for trendlines allowing him or her to enter or exit a trade. An investor can also look at the pattern and for his or her own trendlines for interpretation.
Since discretionary trading systems allow an investor’s input to forecast trends, they cannot be called entirely mechanical. It also supports many other kinds of patterns like triangles etc. Using a discretionary trading system is thus not as easy and an investor would need the guidance of an experienced professional who has benefitted from it in the past.

Whatever the trading system an investor uses, it is important to make sure that the system and the investor understand each other completely to make a successful trade. A trading system and its understanding only makes sure that an investor places the trades in a more disciplined and planned manner instead of going by hunches, guesses or rumors. These systems will also help keep tabs on the trades enabling investors to cut losses and minimize risk. A CFD trading system is a good disciplinary guard for an investor and protects him from getting emotional, so using it critical to success in CFD trading.