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Contracts for difference (CFDs) are one of the most popular vehicles for modern traders who want to play the markets without being tied to asset ownership or high costs of entry. For those who wish to navigate any market by speculating on price moves in either direction, CFDs are the most efficient trading vehicle available. But there are other advantages that make contracts for different powerful ways to get involved in any asset class.
Any account holder in a reputable online brokerage can benefit from technology tools that empower their strategies. Besides backtesting and customized algorithmic robots, users of all skill levels can do real-time execution in a fully simulated environment, use mobile apps anywhere they go, add the power of AI (artificial intelligence) to their repertoire, get automated entry and exit signals, and size all their positions automatically on every trade. Here are pertinent details about the most popular tech tools people are using to conduct their activity.
Backtesting
All the top platforms offer one or another form of backtesting capability. The feature is invaluable for those who like to experiment with customized or ready-made apps. The process involves applying a set of trading rules to historical data and seeing how a particular plan might have worked. While backtesting is not a guarantee for future success, it does offer peace of mind for those who want to make certain that a given set of operational rules would have performed admirably in another scenario.
If you are the type of person who prefers to test a hypothesis before putting it into action, look for a brokerage platform that allows extensive backtesting. In some cases, options are limited to simple trading plans and can only use historical data from the past few years. Other offerings are elaborate, giving account holders a chance to experiment with datasets as far back as the 1960s.
Customized Algorithmic Bots
Having access to customized bots that utilize complex mathematical algorithms can keep risk levels as low as possible. Those who use online trading platforms with this capability get the most out of CFD-related technology. The bots are an advanced tool and are growing in popularity among experienced and new CFD enthusiasts.
You don’t need to be a programming genius to construct a customized bot. In fact, online brokerage platforms sometimes include features that let newcomers build bots from ready-made components, launch them directly onto the platform, and begin using them immediately. However, those with advanced IT skills can design their own complex algorithm bots and use them whenever the need arises.
Unlike CFD forex trading, spread betting forex does not involve commissions or fees; costs are built into the spread, making it a cost-effective alternative.
Simulated Trading in Real-Time
Simulation platforms and demo accounts let users learn the ropes in real-time conditions with fictitious money. There is no financial risk at all, but it is possible to gain agility and speed at placing orders and executing trades under actual market conditions. The latest iteration of simulators is highly advanced technical applications that mimic reality. Because contract for difference prices can move quickly, it’s essential for users to feel confident when they put their own money on the line and enter positions.
AI Powered Analysis
The use of AI in the world of CFD trading offers unlimited possibilities. Already, AI-driven bots allow users to set parameters and execute automated transactions in a matter of seconds, even when markets are moving at lightning speed. Likewise, AI lends an element of predictive analysis to the game and gives people a glimpse of the most likely direction of prices in the near term.
Entry & Exit Signals
Automated bots and AI-enabled apps can be set to generate specific entry and exit signals based on the user’s risk parameters, account size, and dozens of other factors. Some who create or use bots wish to see the signals first and then execute the orders themselves. Others set the entire system on autopilot and monitor it at regular intervals.
Automatic Position Sizing
Setting the proper position size on forex based CFDs can be tricky. The process involves a good deal of mathematical calculation and is time-consuming. Fortunately, better platforms offer auto sizing. If you wish to purchase the USD/EUR currency pair but wish to limit every transaction to no more than 2% of available trading capital, an auto-sizer could save you at least 10 minutes of calculations.
That way, it’s easier to place an order quickly when prices are volatile. A position sizer asks for a few pieces of data, like the total amount of funds for the trade, the currency pair, stop loss points, and stop gain placement. From there, the sizer can show the ideal order parameters, thus minimizing risk and determining the precise size of the order.
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