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Click here for basic prerequisite Index CFD knowledge.
TRUMarkets offers trade suggestions on Index CFDs providing an entry, stop loss and exit level via SMS and email.
The following is a typical trade suggestion that you would receive as a Subscriber to TRUMarkets:
Position Trade Example
Entry:
On the 28th January at 2.45 p.m., the SPI was quoted at 3476/3477 and our Index Analyst from our trading desk attained a “Entry” signal.
An SMS text message and email was sent out our TRUMarkets’ subscribers as per the following:
"TRUMarkets: Entry signal- Trade size $600 - Sell ASX200 3476/Target 3380/Stop Loss 3530".
As per the prices above on the 28th January, 2009 at 2.45 p.m., the SPI was quoted at 3476/3477.
- On our web site, Members of TRUMarkets would be able to login and attain a succinct fundamental and technical summary behind the reasons for the Index CFD trade suggestion along with a supporting chart. See charts below
- The subscriber can choose to trade the suggestion as per our recommendation and would either log in to their platform or call their CFD Provider to action the trade.
5 mins chart
30 mins chart
Reason for Trade suggestion
- In light of the market downtrend at present and indicative early weakness in the US overnight futures, we are looking for levels to sell today or shorting the SPI.
- Sell on a break beneath the horizontal support lows on the SPI futures contract, which is at 3476.
- We are looking at a medium-term target back to 3380, which can be seen on the 30 mins chart.
Exit
On the 4th February, the SPI price subsequently fell. In mid-afternoon trading the SPI fell to a level of 3400. TRUMarkets subsequently sent out an emasl/SMS alert to take profit, delivering a gain of 76 points.
TRUMarkets CFD Index trade email/SMS read:
"TRUMarkets: Exit signal- Buy back Short ASX200 index CFD @ best (last 3400) to take profit ahead of our original target"
Profit Calculations:
CFD Providers provide different leverage levels in relation to Index CFDs, though the majority of them deliver 100 X leverage on your investment.
Based upon 100 X leverage and the trader trades a medium-term trade position size of $600, the trader would take 17 lots. The trader would have invested 17 X 3476/100 = $591 in the trade.
On those assumptions, this trade suggestion would have delivered the trader a gain of 76 X 17 = $1,292 in net profit or a 219% return on an outlay of $591. This is taken from the GFT platform.
Given the high leverage provided on CFD Index trades by CFD providers, TRUMarkets encourages good money management and trade size disciplines. i.e. controlled stop-loss exit points coupled with a sensible number of lots traded that won't break the trading bank.
To assist the trader, TRUMarkets encourages subscribers to make us of the TRUMarkets Position Size and Margin Calculator by clicking here.
Essential Knowledge for Beginners
- The index CFDs are offered by CFD Providers, which are normally priced off the corresponding futures contract of the main index of the particular country. For instance, the benchmark of the Australian index CFD contract is the Share Price Index Futures (SPI). Each point movement in SPI usually translates to the same amount of movement in the corresponding CFD provider's equivalent index. They all have their own equivalent index because it is far too expensive to use the SPI itself.
- Leverage is attained may vary from CFD provider to CFD provider, though typically deposits of between 0.5% – 1% (leverage of 100 x to 200 times) are taken on the main world indices CFDs.
- As the degree of leverage you undertake will vary depending upon your own circumstances (risk profile and capital available to trade), we will provide a general guide as to trade size to assist Members in generating their own capital management plans.
- The various providers will normally provide a base figure at the commencement of each trading day and this value will vary slightly each day depending upon how many dividends were paid by the major companies.
- Like the with the Aussie market in which the main CFD traded index is priced off the SPI, in other countries such as the UK and US, their prices are similarly priced off the Dow Futures and FTSE Futures.
- You will need to check what the equivalent price level of the particular index CFD is trading at with your CFD provider before you enter the trade as we will be quoting our trades based upon the futures contract.
Types of Index CFD trades TRUMarkets suggests:
- Position size of $A800, (based on 100 x leverage for FX and Index CFDs). The short-term time frame is envisaged, so a tight stop is used.The trade will generally have a tight stop loss and will be closed during the same session that the trade is opened.
- Position size of $A600, (based on 100 x leverage for FX and Index CFDs). A medium-term time frame is envisaged, it allows for a trade with a wider stop level.
- Position size of $A400, (based on 100 x leverage for FX and Index CFDs). A longer-time frame is envisaged and a lower $ value is chosen.
- Position size of $A200, (based on 100 x leverage for FX and Index CFDs). A 'position trade' time frame is envisaged, with the longest perceived time frame. The $ value risk exposure enables the widest stop level.
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