Analysis and Trade Preparation · CFDs Trading Guide

Price structure helps describe what the market has done. It becomes useful for trading only when its definitions and failure conditions are explicit.

Describe before predicting

An upward sequence of higher swing highs and higher swing lows is one way to describe a trend. A downward sequence reverses that pattern. The result depends on the timeframe and swing definition. A rising daily structure can contain a falling intraday structure, so state which horizon the analysis addresses before choosing an entry.

Treat levels as areas of interest

Support and resistance summarise places where trading previously changed direction or intensity. They are not walls that prices must respect. Use a consistent method to identify zones and allow for quote differences. A provider bid chart and an underlying market midpoint chart can show different touches around a narrow level.

Connect structure to an invalidation rule

Imagine a research setup with entry at 1,020, a support zone around 1,000 and a planned exit at 992. At $2 per point, one contract has $56 of planned price risk. An illustrative target at 1,076 offers $112 before costs. That two to one relationship describes payoff distances, not the probability of success.

Test the definition rather than the picture

Record how swing points are identified using information available at the time. A rule that requires later bars to confirm a low cannot use that low earlier. Examine failed breaks and flat markets as well as attractive examples. Chart analysis should produce repeatable questions, not certainty from a familiar visual pattern.

Try it yourself

Entry is 450, the planned exit is 442 and the target is 466. The point value is $3. What are price risk and potential price gain for two contracts?

Show the worked answer

Price risk is 8 × $3 × 2 = $48. Potential gain is 16 × $3 × 2 = $96 before costs. The ratio does not establish a positive expected return.

Further reading

Educational material, not a recommendation to trade. Numerical examples are hypothetical. CFDs involve leverage and substantial risk of loss. Availability, costs and protections depend on the contract, legal entity, jurisdiction and client classification.

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