Handbook on CFDs Trading – Book Review

Book: Handbook on CFDs Trading
Author: Nicholas Tan
Publisher: Rank Books
Read on: 12 January 2015

41 Take-aways:

1. . Stocks for CFD varies from broker to broker.
2. . Pay only 10 to 20% of underlying stock value.
3. . Do not own underlying stocks but beware dividend.
4. . Upon dividend payment, must pay back if short.
5. . CFDs have no expiry date unlike options.
6. . Must have deposit of min 20% contract value.
7. . If fall below 20%, margin call to top up.
8. . Must pay interest for open position till sold.
9. . Earn interest if short position.
10. . Must pay commission charge per transaction.
11. . No fixed contract size.
12. . Can trade SGX, overseas shares, forex and commodities.
13. . In a wrong directional trade, loss can be big.
14. . Always put a stop loss order on open positions.
15. . Use hedging strategy against direction change.
16. . Use Pair Spread Strategies in uncertain market situations.
17. . Buy one stock and sell another at the same time and same cost.
18. . Buy one equity with strongest outlook and another with the weakest.
19. . Fundamental news resources:
20. . Research.sgx.com
21. . Remisiers.org > Research
22. . Trading opportunity Information to look out for:
23. . Company securing contracts.
24. . Company Financial earnings report and release date. Act before the announcement.
25. . SGX.com > Company Announcements
26. . Brokers upgrade or downgrade of stocks will impact the stock price.
27. . Sponsored research reports have little impact on the stock price.
28. . More impact come from reports by bigger broking houses like Goldman Sach, J.P. Morgan and Merrill Lynch.
29. . Subscribe to Dow Jones news.
30. . Check the news every morning before the market opens.
31. . Look up for recommendation by bigger broking houses.
32. . Make sure the counter is either an active counter or an index stock.
33. . Make sure the difference between the current trading price and the projected price is significant.
34. . Look out for trading gaps. Huge price difference between opening and last done.
35. . Common gap: within trading range. No effect.
36. . Breakaway gap: break from recent high or low or support or resistance. Likely to continue in the same direction of the breakout.
37. . Midway gap: occurs midway through the trend. Very useful info. Indicates the end point in the same direction. Symmetrical to previous high/low.
38. . Exhaustion gap: a midway gap that does not continue but gets filled up in a couple of days. Indicates reversal of trend.
39. . Use support and resistance created within the gap zone. Trade within the zone. Stop loss at 2 points below or above if breakout.
40. . Use trading momentum retrace method. Buy a dip in a strong trend. Use MACD (EMA 20) to confirm the end of the dip. Use ADX (>30) To gauge the strength of the trend.
41. . Price pull back on EMA20. ADX >30. MACD line turning after histogram peak. Cut if price drop below previous low. Profit target above previous high.

Source:
Handbook On CFDs Trading: How to Make Money When the Market Is Up or Down