Beginners guide to algorithmic trading CFDs in Australia
If you’re not familiar with the term ‘algorithmic trading’, here’s a quick explanation of what it is. It’s a method to trade financial markets by setting an algorithm (or rule) that tells your computer when to buy and sell. In this guide, we’ll cover how algorithmic CFD trading Australia works as well as their benefits and some things you should consider before diving in.
What are CFDs?
CFDs stand for Contracts for Difference, which means they’re a way of betting on whether the price of a particular asset will rise or fall. For example, if you think Apple shares will rise, then you’d go long using a CFD, which means you can profit from the upside without actually owning the shares.
This is one of the steps that professional traders use to ensure better performance when trading.
Why algorithmic trading?
One of the main benefits of algorithmic trading is that you don’t need to stare at screens all day waiting for opportunities to arise, as it does everything automatically for you. It also means no emotions are involved, so if it says ‘sell’, then sell – no questions asked (until, of course, there’s some edge case that requires human intervention).
Algorithmic trading allows traders big and small to trade alongside institutional players with greater accuracy and efficiency than ever before. Lastly, it can make money in both rising and falling markets, which is a big plus.
What’s the catch?
There isn’t one. Well, not really – of course, algorithmic trading requires you to have a sound strategy and know what you’re doing; otherwise, it might turn out to be a costly lesson. It can allow for greater profits at reduced risk if done correctly, though, due to its systematic nature. It has many advantages over traditional forms of trading but is only suitable for specific traders.
How do I start?
You mustn’t dive into it headfirst without knowing what you’re doing, as this could prove costly in the long run. The best advice is to get some experience under your belt before using real money on trades. Once you feel comfortable with your strategy, then it’s time to open a demo or live trading account and get going.
Here are some profitable investment opportunities for beginners interested in algorithmic trading CFDs.
There are two main categories that stocks fall into; safe stocks and high-risk stocks. High-risk stocks are usually more volatile on the market but also have a higher potential for gains, whereas low-risk companies tend to be less risky but, at the same time, might not make as much money.
If you know which assets you want to invest in beforehand, it is essential to choose a broker who offers CFDs on these assets because otherwise, it will be impossible to trade them successfully. In this example, we’ll use Apple Inc (AAPL) as an example of a high-risk stock that many beginners will want to begin with.
Google Finance has their price listed as $US147.91 per share, and however, if you were only investing a small amount of money, it would be tough to purchase the entire share. CFDs are extremely useful because you can buy shares in Apple without owning them.
Exchange-Traded Funds (ETFs)
Exchange-traded funds are another excellent option for beginners who want to invest but don’t know which assets they should own yet.
ETFs allow buyers access to a basket of assets contained in the fund. When you invest in an ETF, you buy shares of ownership in a relevant index, which means that if the index goes up, your assets also go up. These funds are generally very stable investments because they don’t move with market trends as stocks do.
ETFs often have low expense ratios because many companies offer ETFs through their company retirement savings programs, meaning investors can buy funds at discounted rates. Investing in an index is cheaper than buying individual assets because more miniature trading and research are required to create an index fund.
Algorithmic trading is an excellent way for traders who prefer the convenience of not having to stare at charts all day. It offers accurate trades 24/7, 365 days a year while allowing you to maintain a flexible lifestyle – what more could you ask for?
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