I'm new to the CFD world, having previously only traded/invested long in equities.
Have been doing some research into common CFD techniques and find the concept of leveraged pairs trading to be a very interesting, if marginal, means of profiting in a market-neutral sense.
My basic idea is to take a leveraged short position on something like RIO and an equal leveraged long position on a correlated stock (eg. BHP) at the end of each day. Overnight, I watch the overseas markets for an indication of the next day's move - given how the ASX seems to be the Dow's beyatch at the moment...
I adjust my stops accordingly to get out of whichever is going to take a loss, and loosen my profit taking stop on the other position to attempt to make out with a marginal profit. The idea hinges on getting out of the loss position asap, and letting the profit run just long enough to profit overall. It requires some timing to be sure, and also relies on some movement in the same profit direction after opening. I would of course be running very tight oco stops.
Most pairs trading advice I've seen seems to hinge on picking currently divergent shares that should converge back to historal correlations.
My strategy is very much a 1 day, get-in, get-out kind of trade and may work in the current volatile environment where commodities shares appear to be moving one way or another with 1-2% daily changes at present.
I'm sure plenty of folks do this, and would like to hear some comments from the more experienced folks on this?