CFD trading tips when markets are at all-time highs

For CFD traders relying on fundamental analysis when trading stocks, indices, or ETFs, it is frustrating to see leading market indexes trading at or near all-time highs. There are plenty of problems that should be on the spotlight, yet the market participants are focusing on flows, ultra-low interest rates and the combination of fiscal-monetary interventions. Remaining objective in such instances would be important which is why we would like to share some useful tips when trading markets at all-time highs.

CFD trading tips

#1 Buy on dips and with favorable sentiment

We don’t know yet if a debt crisis could hit in 2021 so in the meantime, technical analysis will continue to be our most important asset. Even though markets are at all-time highs, short-term corrective moves still occur, providing plenty of new opportunities to get long at more attractive levels. It would be important to buy on dips, when the sentiment is not shifting, to avoid getting trapped in case valuations will turn on the downside.

#2 Sell panic

When panic occurs, a wave of selling emerges because market participants want to get out fast, regardless of technical condition. In this case, CFD traders need to constantly monitor the latest market news and see when valuations are impacted negatively. Unfortunately, ground-breaking news don’t show up every day, so it will be important to filter all the noise.

Panic selling creates plenty of breakout opportunities. As always, you should stick to the basic technical analysis principles and trade based on that the market is telling you. Interest rates on treasuries continue to rise and it won’t take long until that could weigh on stocks. Political tensions across the world are still elevated. The pandemic is yet to be solved. Bad news can come from many different directions.

#3 Monitor psychological areas

One of the most challenging parts when buying in a market at all-time highs is figuring out where is the optimal location for your take profit. Trading in uncharted terrain is dangerous, which is why most of the professionals use key psychological areas. By that we are meaning round numbers (for instance, 3650 or 3700 on the S&P 500). Also there are some traders using Fibonacci extension levels. The market had shown us that these levels are accurate in predicting corrective moves.

All that matters is that it would be impossible for the price to up in a straight line, which is why managing trades according to the tips we’ve shared would be extremely important.

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