The next thing you should know is how to open trades. There are many ways to predict the rise or fall of the price of an asset. You can use technical indicators to analyse and spot trends or make predictions based on current financial news, which affects the market. Read more about this in the strategy section of this guide. Let’s take a closer look to the actual trade!
In this case we use the so-called ‘fundamental analysis’. This analysis is the most straightforward and easiest to learn. By using this analysis we look at the news to spot opportunities for trading certain assets. Any news about the economy, large companies or big events will help us predict the price movement of the asset. This example will help you to clearly understand how both long and short trades work with CFD trading.
Using an example trade, here is how a trader might proceed:
For this trade we expect to make profit by trading in Bitcoins. By this we mean we expect the price of the asset Bitcoin to change after we looked at the news and found an opportutnity to trade a ‘long’ position. As you know ‘long’ means that we will expect the price of the bitcoin asset to rise.
We found the following news article online. Keep in mind that you can also check the news or read the daily newspaper to spot opportunities in the market. Shortly after we read the article we decided to open the position.
” Bitcoin hits $1,600 for the first time and investors say it could rally to $4,000 in a few months. The recent price rise has been driven by positive developments around the underlying technology. “
Choose a market
The first step is to decide which market you want to trade on. You can get trading inspiration through our fundamental and technical analysis. Decide to buy (long) or sell (short). Choose ‘buy’ if you think the price will increase in value or ‘short’ if you think the market will fall in value.
Select your trade size
Choose how many CFDs you want to trade. We decided to go for a long position with 2 bitcoin CFDs. As you can see in the screenshot the required margin is €235,04 which is $261,40 in dollars. You are free to trade with whatever amount you would like to trade with. Of guide most brokers wil let you choose your own base currency based on the country you are from. So for example traders from the UK are able to trade with pounds £.
As you can see the total value of our trade position is higher since we have the advantage to trade with the leverage as explained earlier. Click on ‘buy’ and the position will be opened.
Monitor your trade
Once you have placed your trade, you will see your profit/loss update in real time. You can exit your trade anytime by clicking the close trade button. We opened our trade at 18:02 pm. Within 2 hours we could see, as the graph below shows, that our prediction was correct. We started to make profit with our ‘long’ position in Bitcoin CFD’s.
Close your trade
At 20:17 pm we decided to close our trade. We made a good profit of €114,44 in about 2 hours.