CFDs: How to trade in AllStars Trader CFDs

CFDs (Contract for Difference) are a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time.  So, you can profit (or get a loss) from the price movement without owning the underlying asset.  This is why AllStars Trader sports stocks are traded as CFDs. 

You can predict and trade the success of Raheem Sterling or Lorenzo Insigne, without buying a part of them.  Instead of owning the underlying asset, the player, you receive revenues based on the price change of the asset.  You can use your knowledge of sports to pick the players who are adding value and those who will be on the transfer list!

We realise that AllStars CFDs are very different to the normal assets, but the basic principles of buying and selling are nearly the same. And, in fact, on our MT5 platform, you can trade ADRIX™ data AllStars CFDs alongside traditional CFDs at the same time.

Choose Your CFD Stock or Player and Trading Strategy

Some of the highest priced CFDs- kylian mbappe and cristiano ronaldo on the pitch
Kylian Mbappe and Cristiano Ronaldo

The first thing to consider is which asset you want to trade.  We hope that you may be more interested in Ronaldo rather than Rolls-Royce.  If you find it easier to evaluate the potential performance of Newcastle in the English Premier League rather than looking at the P&L of Netflix, then AllStars Trader CFDs are perfect for you.

Once you have decided on the assets or players you are interested in, you need to define your strategy.  The good thing about CFD stocks is that you can go long or short. So, you can decide to focus on, for example, midfield players, covering the La Liga, Bundesliga and the Premiership, either buying or selling depending on how you rate their potential performance. 

Like all investments, you still need to do the homework, but your knowledge of the sport you are trading will hopefully give you a feel for the investment you want to make.  However, if your strength and focus is midfield players, don’t get tempted into suddenly buying a goalkeeper because he has one good match.  You still need to research, check and be sure that he is the right choice.

As part of your strategy, and this is the same if you were trading in forex, cryptocurrencies or metal commodities like gold, you need to set your limits.  This can be through stop loss controls but is more about recognising that not all trades are successful.  If you lose, don’t keep chasing the trade and throw more money at a losing position.  If you lose, close the position and move on.

In simple terms, it is like a football team playing really well but conceding a silly goal.  The temptation is to throw everyone forward and try and get a goal back, a strategy that may lead to a second or third goal being scored against them.  The team at one down must stick to its game plan, play well, keep its shape and hopefully it can get the goal back and go on to win. 

CFDs Leverage: Start Small and Trade Carefully

white and black knight chess pieces depicting the concept of CFDs 
chess board

When you know the players or assets you want to trade, you need to select your trade size, how much you want to trade and take into account the leverage you can use.  CFD trading is a leveraged product which means you only need to have a small percentage of the overall trade value, known as margin, in your account in order to open the trade.

Generally speaking, the larger the value of your trade, the more margin required.  It is important that you have sufficient funds in the account to place the trade.  The margin calculator in the AllStars Trader MT5 trading platform will automatically calculate your initial margin for you.

When you place any CFD trade you need to be 100% aware that leverage allows you to make greater profits but also places you at the risk of incurring larger losses if the market works against you.  If you are new to CFD trading you must use leverage ‘slowly and carefully’.

Start with smaller trades.  Look to see how your players perform through a match and then what happens to their price between games.  AllStars Trader sport stocks CFDs will always be more volatile when the team is playing or when special events are happening, like the closing of the transfer windows. Practice on our free demo account if you must and get a practical feel of how CFD margins work before going all in.

As you start trading the Allstars Trader ADRIX™ data-based CFDs you will find that they are uncorrelated to the main financial markets.  This means that if the DowJones slips 100 points and Bitcoin drops USD10,000 in a day, any sport stocks CFDs you have will be unaffected by these events.

You can continue to go long on a player stock even if Wall Street is crashing!

Alternatively, between matches, you may decide to buy a gold CFD as a hedge against the Wall Street downturn and hold this alongside your Serie A defenders.  Then, when the gold price stops increasing, and your best two central defenders have reached your take profit target you can sell out and bank all your winnings. The options are endless! Visit AllStars Trader to open your live account and start trading in traditional and sports CFD stocks today.

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