If you've spent any time looking at a trading terminal, you've seen it. A news headline breaks, a chart line snaps, and suddenly everyone is rushing for the same exit or the same entrance. It looks like chaos. In practice, it is often a chain of mechanical responses.

This matters for a couple of reasons. Many readers assume the story is the trade. It is not. The story, whether it is an interest rate decision, a supply shock or an earnings miss, is the fuel and the playbook is the engine.

Below are seven core strategies often used in contracts for difference (CFDs) trading. With CFDs, you are not buying the underlying asset. You are speculating on the change in value. That means a trader can take a long position if the price rises, or a short position if it falls.

Seven strategies to understand first

1. Trend following (the establishment play)

Trend following works on the idea that a market already in motion can remain in motion until it meets a clear structural obstacle. Some market participants view it as a chart-based approach because it focuses on the prevailing direction rather than trying to call an exact turning point.

The rationale: The aim is to identify a clear directional bias, such as higher highs and higher lows, and follow that momentum rather than position against it.

What traders look for: Exponential moving averages (EMAs), such as the 50-day or 200-day EMA, are commonly used to interpret trend strength, though indicators can produce false signals and are not reliable on their own.

How it works: The 50-period EMA can act as a dynamic support level that rises as price rises. In an uptrend, some traders watch for the market to make a new higher high (HH), then pull back towards the EMA before moving higher again. Each higher low (HL) may suggest buyers are still in control.

When price touches or comes close to the 50-period EMA during that pullback, some traders treat that area as a potential decision zone rather than assuming the trend will resume automatically.

What to watch: The sequence of HHs and HLs is part of the structural evidence of a trend. If that sequence breaks, for example if price falls below the previous HL, the trend may be weakening and the setup may no longer hold.

2. Range trading (the ping-pong play)

Markets can spend long stretches moving sideways. That creates a range, where buyers and sellers are in temporary balance. Range trading is built around this behaviour, focusing on moves near the bottom and top of an established range.

The rationale: Price moves between a floor, known as support, and a ceiling, known as resistance. Moves near those boundaries can help define the width of the range.

What traders look for: Some traders use oscillators such as the Relative Strength Index (RSI) to help judge whether the asset looks overbought or oversold near each boundary.

How it works: The support level is a price zone where buying interest has historically been strong enough to stop the market from falling further. The resistance level is where selling pressure has historically prevented further gains.

When price approaches support, some traders look for signs of a potential rebound. When it approaches resistance, they look for signs that momentum may be fading. RSI readings below 35 can suggest the market is oversold near support, while readings above 65 can suggest it is overbought near resistance.

What to watch: The main risk in range trading is a breakout, when price pushes decisively through either level with strong momentum. This may signal the start of a new trend and using a stop-loss just outside the range on each trade may help manage that risk.

3. Breakouts (the coiled spring play)

Eventually, every range comes under pressure. A breakout happens when the balance shifts and price pushes through support or resistance. Markets alternate between periods of low volatility, where price moves sideways in a tight range, and high-volatility bursts where price can make a larger directional move.

The rationale: Quiet consolidation can sometimes be followed by a broader expansion in volatility. The tighter the compression, the more energy may be stored for the next move.

What traders look for: Bollinger Bands are often used to interpret changes in volatility. When the bands tighten, a squeeze is forming. Some market participants view a move outside the bands as a sign that conditions may be changing.

How it works: Bollinger Bands consist of a middle line, the 20-period moving average, and 2 outer bands that expand or contract based on recent price volatility. When the bands narrow and come close together, the squeeze, the market has been unusually calm.

This is often described as a coiled spring. Energy may be building, and a sharper move can follow. Some traders treat the first move through an outer band as an early clue on direction, rather than a definitive signal on its own.

What to watch: Not every squeeze leads to a powerful breakout. A false breakout occurs when price briefly moves outside a band, then quickly reverses back inside. Waiting for the candle to close outside the band, rather than entering mid-candle, can reduce the risk of being caught in a false move.

4. News trading (the deviation play)

This is event-driven trading. The focus is on the gap between what the market expected and what the data or headline actually delivered. Economic data releases, such as inflation figures (CPI), employment reports and central bank decisions, can cause sharp, fast moves in financial markets.

The rationale: High-impact releases, such as inflation data or central bank decisions, can force a fast repricing of assets. The bigger the surprise relative to expectations, the larger the move may be.

What traders look for: Traders often use an economic calendar to track timing. Some focus on how the market behaves after the initial reaction, rather than treating the first move as definitive.

How it works: Before the news, price may move in a calm, tight range as traders wait. When the data is released, if the actual reading differs significantly from the consensus expectation, repricing can happen fast.

Gold, for example, may spike sharply on a CPI reading that comes in above expectations. However, the candle can also print a very long upper wick, meaning price reached the spike high but was then rejected strongly. Sellers may step in quickly, and price may retrace. This spike-and-retrace pattern is one of the more recognisable setups in news trading.

What to watch: The direction and size of the initial spike do not always tell the full story. Wick length can offer an important clue. A long wick may suggest the initial move was rejected, while shorter wicks after a data release may indicate a more sustained directional move.

5. Mean reversion (the rubber-band play)

Prices can sometimes move too far, too fast. Mean reversion is built on the idea that an overextended move may drift back towards its historical average, like a rubber band pulled too tight, then snapping back.

The rationale: This is a contrarian approach. It looks for stretches of optimism or pessimism that may not be sustainable, and positions for a return to equilibrium.

What traders look for: A common example is price moving well away from a 20-day moving average (MA) while RSI also reaches an extreme reading. In that setup, traders watch for a move back towards the mean rather than a continuation away from it.

How it works: The 20-period MA represents the market's recent average price. When price moves into an extreme zone, such as more than 3 standard deviations above or below that average, it has moved a long way from its recent trend.

An RSI above 70 can suggest the market is stretched to the upside, while below 30 can suggest the same to the downside. Some mean reversion traders use these combined signals as a sign that a pullback towards the 20-period MA may be possible, rather than assuming the move will continue to extend.

What to watch: Mean reversion strategies can carry significant risk in strongly trending markets. A market can remain extended for longer than expected, and a position entered against the short-term trend can generate large drawdowns. Position sizing and clear stop-losses are critical.

6. Psychological levels (the big figure play)

Markets are driven by people, and people tend to focus on round numbers. US$100, US$2,000 or parity at 1.000 on a currency pair can act as magnets. In financial markets, certain price levels can attract a disproportionate amount of buying and selling activity, not because of technical analysis alone, but because of human psychology.

The rationale: Large orders, stop-losses and take-profit levels can cluster around these big figures, which may reinforce support or resistance. This self-reinforcing behaviour is one reason these rejections can become meaningful for traders.

What traders look for: Traders often watch how price behaves as it approaches a round number. The market may hesitate, reject the level or break through it with momentum. Multiple wick rejections at the same level may carry more weight than a single one.

How it works: When price approaches a round number from below, some traders watch for long upper wicks, the thin vertical line above the candle body. A long upper wick means price reached that level, but sellers stepped in aggressively and pushed it back down before the candle closed.

One wick rejection may be notable. Three in a cluster may be more significant. Some traders use this accumulated rejection as part of the case for a short (sell) setup at that level.

What to watch: Psychological levels can also act as magnets in the opposite direction. If price breaks through with conviction, the level may then act as support. A decisive close above the level, rather than just a wick break, can be an early sign that the rejection setup is no longer holding.

7. Sector rotation (the economic season play)

This is a macro strategy. As the economic backdrop changes, capital may move from higher-growth sectors into more defensive ones, and back again. Not all parts of the sharemarket move in the same direction at the same time.

The rationale: In a slowing economy, discretionary spending may weaken while demand for essential services can remain more stable. Investors may rotate capital between sectors accordingly.

What traders look for: With CFDs, some traders express this view through relative strength, taking exposure to a stronger sector while reducing or offsetting exposure to a weaker one.

How it works: During a growth phase, when the economy is expanding, investors tend to prefer growth-oriented sectors like technology. As the economic environment shifts, perhaps due to rising interest rates, slowing earnings or increasing recession risk, a rotation point may emerge.

In the slowdown phase, the pattern can reverse. Technology may weaken while utilities may strengthen, as investors move capital into defensive, income-generating sectors. Early signals can include relative underperformance in growth sectors combined with unusual strength in defensives.

What to watch: Sector rotation is not usually an overnight event. It typically unfolds over weeks to months. Tracking the ratio between two sectors, often shown in a relative strength chart, can make this shift visible before it becomes obvious in absolute price terms.

Why risk management is the engine of survival

The headline move is one thing. The market implication for your account is another. If you do not manage the mechanics, the strategy does not matter.

Because CFDs are traded on margin, a small market move may have an outsized impact on the account. If leverage is too high, even a minor wobble may trigger a margin call or automatic position closure, depending on the provider's terms. This is not a theoretical risk. It is a common reason new traders lose more than they expected on a trade that was directionally correct.

The market does not always move in a straight line. Sometimes, price gaps from one level to another, especially after a weekend or major news event and in those conditions, a stop-loss may not be filled at the exact requested price. That is known as slippage. It is one reason large positions may carry additional risk into major announcements.

Bottom line

The vehicle is powerful, but the playbook is what helps keep you on the road.

The obvious trade is often already priced in. What matters more is understanding which market condition is in front of you. Is it trending, ranging, breaking out or simply reacting to a headline?

Readers assessing leveraged products often focus on position sizing, risk limits and product disclosure before deciding whether the product is appropriate for them. The headlines will keep changing. The maths of risk management does not.

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^{Disclaimer: This article is general information only and is intended for educational purposes. It explains common trading concepts and market behaviours and does not constitute financial product advice, a recommendation, or a trading signal. Any examples are illustrative only and do not take into account your objectives, financial situation or needs. CFDs are complex, leveraged products that carry a high level of risk. Before acting, consider the PDS and TMD and whether trading CFDs is appropriate for you. Seek independent advice if needed. Past performance is not a reliable indicator of future results.}

The war in Iran is increasingly shifting from a regional conflict into a global energy shock, as disruption in the Strait of Hormuz threatens the oil market at its most critical chokepoint.

Key takeaways

• Around 20 million barrels per day (bpd) of oil and petroleum products normally pass through the Strait of Hormuz between Iran and Oman, equal to about one-fifth of global oil consumption and roughly 30% of global seaborne oil trade.

• This is a flow shock, not an inventory problem. Oil markets depend on continuous throughput, not static storage.

• If the disruption persists beyond a few weeks, Brent could shift from a short-term spike to a broader price shock, with stagflation risk.

The world’s most critical oil chokepoint

The Strait of Hormuz handles roughly 20 million barrels per day of oil and petroleum products, equal to about 20% of global oil consumption and around 30% of global seaborne oil trade. With global oil demand near 104 million bpd and spare capacity limited, the market was already tightly balanced before the latest escalation.

The strait is also a critical corridor for liquefied natural gas. Around 290 million cubic metres of LNG transited the route each day on average in 2024, representing roughly 20% of global LNG trade, with Asian markets the main destination.

The International Energy Agency (IEA) has described Hormuz as the world’s most important oil transit chokepoint, noting that even partial interruptions may trigger outsized price moves. Brent crude has moved above US$100 a barrel, reflecting both physical tightness and a rising geopolitical risk premium.

Tankers idle as flows slow

Shipping and insurance data now point to strain in real time. More than 85 large crude carriers are reported to be stranded in the Persian Gulf, while more than 150 vessels have been anchored, diverted or delayed as operators reassess safety and insurance cover. That would leave an estimated 120 million to 150 million barrels of crude sitting idle at sea.

Those volumes represent only six to seven days of normal Hormuz throughput, or a little more than one day of global oil consumption.

A market built on flow, not storage

Oil markets function on continuous movement. Refineries, petrochemical plants and global supply chains are calibrated to steady deliveries along predictable sea lanes. When flows through a chokepoint that carries roughly one-fifth of global oil consumption and around 30% of global seaborne oil trade are interrupted, the system can move from equilibrium to deficit within days.

Spare production capacity, largely concentrated within OPEC, is estimated at only 3 million to 5 million bpd. That falls well short of the volumes at risk if Hormuz flows are severely disrupted.

Oil market analysis

How long do idle tankers last?

135M idle barrels — days of cover against each demand benchmark

vs. Strait of Hormuz daily flow  (20M bbl/day)

6.75 days of Hormuz throughput covered

6.75 days

0

5

10

15

20

25

30 days

vs. Global oil consumption  (104M bbl/day)

1.3 days of world demand covered

1.3 days

0

5

10

15

20

25

30 days

vs. US Strategic Petroleum Reserve release  (1M bbl/day)

135 days of full SPR release pace covered

135 days — but SPR exists to replace this role

0

5

10

15

20

25

30 days

---

135M

idle barrels on tankers (midpoint of 120–150M range)

~33%

of daily Hormuz flow that is idle storage, not transit

<31 hrs

is all idle storage against global daily consumption

Sources: IEA, EIA, industry estimates. Idle crude midpoint of 120–150M bbl range used.

GO Markets

Scenarios for the weeks ahead

Market trajectories now hinge on the duration and severity of the disruption.

Short disruption, 1 to 2 weeks

If tanker traffic resumes within 1 to 2 weeks, the shock may show up as a sharp but ultimately reversible spike.

Cumulative supply loss would remain relatively limited, while inventories and strategic stocks may partly bridge the shortfall. In that scenario, Brent could trade in roughly the US$95 to US$110 range as traders price temporary disruption and elevated risk premia.

Extended disruption, 2 to 4 weeks

Beyond a fortnight, the cumulative loss becomes more material.

A 2 to 4 week disruption affecting up to 20 million bpd could imply roughly 280 million to 560 million barrels of lost supply. Commercial inventories, floating storage and strategic reserves may then begin to erode more visibly. In that scenario, Brent could shift toward the US$110 to US$130 range, while higher fuel costs may begin feeding into transport and industrial production.

These price ranges are scenario-based and indicative, not forecasts.

If the war ends within four weeks

A ceasefire or credible de-escalation within roughly four weeks would likely trigger a sharp reversal in oil markets, though not an instant reset to pre-crisis levels.

Initially, the unwinding of geopolitical risk premia and the normalisation of tanker traffic could push Brent lower, potentially into the US$80 to US$95 range as speculative and hedging positions are reduced.

Assuming flows are fully restored and further disruptions are avoided, prices could gradually trend back toward the low US$70s over subsequent months, broadly consistent with projections that show inventories rebuilding once supply regains a small surplus over demand.

Watching the oil shock play out on the ASX?
‍See 5 Australian energy stocks traders are tracking after the Iran oil shock.

Inflation risks and macro spillovers

The inflationary impact of an oil shock typically arrives in waves. Higher fuel and energy prices may lift headline inflation quickly as petrol, diesel and power costs move higher.

Over time, higher energy costs may pass through freight, food, manufacturing and services. If the disruption persists, the combination of elevated inflation and slower growth could raise the risk of a stagflationary environment and leave central banks facing a difficult trade-off.

Higher crude rarely moves in isolation.
‍See which global energy and oil-services names tend to come into focus when oil prices rise.

No easy offset, a system with little slack

What makes the current episode particularly acute is the lack of slack in the global system.

Global supply and demand near 103 million to 104 million bpd leave little spare cushion when a chokepoint handling nearly 20 million bpd, or about one-fifth of global oil consumption, is compromised. Estimated spare capacity of 3 million to 5 million bpd, mostly within OPEC, would cover only a fraction of the volumes at risk.

Alternative routes, including pipelines that bypass Hormuz and rerouted shipping, can only partly offset lost flows, and usually at higher cost and with longer lead times.

Bottom line

Until transit through the Strait of Hormuz is restored and seen as credibly secure, global oil flows are likely to remain impaired and risk premia elevated. For investors, policymakers and corporate decision-makers, the core question is whether oil can move where it needs to go, every day, without interruption.

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^{Any scenarios, price ranges or market views in this article are illustrative only and should not be relied on as forecasts, guarantees or trading recommendations. Geopolitical events can cause sudden volatility, reduced liquidity and sharp price movements across oil, forex and CFD markets, and trading in these conditions carries a high risk of loss.}

ASX defence stocks are back on more watchlists and according to the Stockholm International Peace Research Institute (SIPRI), global military spending reached approximately US$2.718 trillion in 2024, up 9.4% in real terms.

Australia’s current defence settings are set out in the 2024 National Defence Strategy and related investment planning documents, which outline long-term capability funding priorities. Furthermore, Canberra has pointed to A$330 billion of capability investment through 2034, including added funding for surface combatants, preparedness, long-range strike and autonomous systems.

Here is the part most people miss: not all ASX defence stocks are the same trade. Some sit close to naval shipbuilding. Some are counter-drone names and some are smaller, higher-risk operators where one contract may matter much more than the market assumes.

5 volatility questions Aussie traders are asking right now

These five names are not a buy list, rather they are a practical watchlist for investors trying to understand where procurement momentum may actually show up on the ASX.

1) Austal (ASX: ASB)

Austal is one of the ASX-listed companies most directly exposed to Australia’s naval shipbuilding pipeline, although contract execution, margins and delivery timing remain important variables.

They aren't just winning random contracts; they have signed a massive legal agreement (the Strategic Shipbuilding Agreement) that makes them the official partner for building Australia's next generation of mid-sized military ships in Western Australia.

In February 2026, the government gave Austal the green light on a $4 billion project. This isn't for just one ship, it’s for 8 "Landing Craft Heavy" vessels. These are huge transport ships (about 100 metres long) designed to carry heavy tanks and equipment directly onto a beach. But here is the part most people miss, shipbuilding is a marathon, not a sprint.

As you can see in the delivery timeline, while construction starts in 2026, the final ship won't be delivered until 2038. For an investor, this means Austal has a "guaranteed" stream of income for the next 12 years, but they have to be very good at managing their costs over that long period to actually make a profit.

2) DroneShield (ASX: DRO)

If you have seen footage of small drones disrupting modern battlefields, DroneShield is building part of the "off switch". Its focus is counter-drone technology, including systems that detect, disrupt or defeat drones using electronic warfare, sensors and software-led tools, rather than relying only on traditional munitions.

By early 2026, DroneShield had moved beyond the label of a promising start-up and into a much larger commercial phase. It reported FY2025 revenue of A$216.5 million, up 276% from FY2024, and said it started FY2026 with A$103.5 million in committed revenue.

One point the market may overlook is the software layer in the model. DroneShield reported A$11.6 million in Software as a Service (SaaS) revenue in FY2025 and said it is working towards SaaS making up 30% of revenue within five years. Its subscription model includes software updates for deployed systems, which adds a growing stream of recurring revenue alongside hardware sales.

Among ASX defence stocks, DroneShield is one of the most direct ways to follow the counter-UAS theme. It is also one of the names where sentiment can swing quickly, because growth stories can rerate both up and down when order timing changes.

The defence stocks to watch: The Iran War winners & losers

3) Electro Optic Systems (ASX: EOS)

EOS builds both the "brain" and the "muscle" for military platforms. It is best known for remote weapon systems, which allow operators to control armed turrets from inside protected vehicles, and for high-energy laser systems aimed at counter-drone defence. EOS has said its unconditional backlog reached about A$459.1 million in early 2026, following a series of contract wins through 2025. That points to a much larger base of secured work, although delivery timing and revenue conversion still matter.

EOS signed a €71.4 million, about A$125 million, contract with a European customer for a 100-kilowatt high-energy laser weapon system. EOS says the system is designed for a low cost per shot and can engage up to 20 drones a minute. The Australian Government has set aside A$1.3 billion over 10 years for counter-drone capability acquisition, and EOS has disclosed that it was part of a successful LAND 156 bid team. That does not guarantee future revenue, but it does support medium-term visibility in a market the company is already targeting.

EOS reads as a rebound story, but one that still depends on execution. The company has reoriented around remote weapon systems, counter-drone systems and lasers, all areas tied to stronger defence spending. The key question is whether it can keep converting backlog and pipeline into delivered revenue while maintaining balance-sheet discipline.

4) Codan (ASX: CDA)

Codan is sometimes left out of casual defence stock lists because it is more diversified. That may be an oversight. In its H1 FY26 results, Codan said its Communications business designs mission-critical communications for global military and public safety markets. Communications revenue rose 19% to A$221.8 million. The company also said DTC delivered strong growth from defence and unmanned systems demand, with unmanned systems revenue up 68% to A$73 million. Codan said about half of that unmanned revenue was linked to operational defence applications in conflict zones.

This is where the story becomes more nuanced. In a basket of ASX defence stocks, Codan may offer a different profile, with less pure headline sensitivity, broader operating diversification and meaningful exposure to military communications and unmanned systems without being a single-theme name. That diversification may also mean the stock does not always trade like a pure-play defence name.

What rising oil prices could mean for Exxon, Chevron and Woodside

5) HighCom (ASX: HCL)

HighCom sits at the speculative end of this list, and it should be labelled that way. The company says its two continuing businesses are HighCom Armor, which supplies ballistic protection, and HighCom Technology, which supplies and maintains small and medium uncrewed aerial systems, counter-uncrewed aerial systems, and related engineering, integration, maintenance and logistics support for the ADF and other aligned regional militaries.

In H1 FY26, revenue from continuing operations fell 59% to A$10.9 million, while EBITDA moved to a A$5.4 million loss from a A$1.9 million profit a year earlier. HighCom also disclosed A$5.1 million in HighCom Technology revenue, including A$3.5 million from small uncrewed aerial systems (SUAS) spare parts and A$1.6 million from sustainment services provided to the Australian Department of Defence.

So yes, HighCom is one of the more financially sensitive ASX defence stocks on the board. But it is also the kind of smaller name that can show how procurement filters down into support, sustainment and specialist protection gear.

Key market observations

• Track program milestones, not just political headlines. Contract awards, manufacturing starts, delivery schedules and sustainment work often matter more than a single announcement day.
• Separate pure-play exposure from diversified exposure. DroneShield and EOS are closer to concentrated defence technology themes, while Codan brings communications exposure within a broader business mix.
• Watch sovereign capability themes in Australia. Austal and EOS are tied to local manufacturing, integration and Australian supply chains, which supports the broader sovereign capability theme in this group.
• Pay attention to balance sheets and cash conversion. Procurement momentum can be real even when timing gets messy. HighCom's latest half is a reminder of that.

Global volatility and CFDs: how to trade after a geopolitics shock

Risks and constraints

Defence headlines can look immediate. Earnings usually are not. Austal's major naval work stretches into the next decade. EOS contracts are delivered over multiple years. DroneShield's order flow appears strong, but the company still separates committed revenue from broader pipeline opportunity. HighCom shows the other side of the coin. Exposure to procurement does not automatically translate into smooth financial execution.

References to ASX-listed defence stocks are general information only, not a recommendation to buy, sell or hold any security or CFD. These stocks can be highly volatile and are sensitive to contract timing, government policy, geopolitics, execution risk and market conditions. Backlog, pipeline and revenue expectations are not guarantees of future performance.

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