Contracts for Difference are an agreement between two parties where they exchange the difference between the opening- and closing price of a contract. CFDs attract retail traders from far and wide, providing the facility to trade against the share price movements without actually selling or buying the physical shares.
With CFD trading, you need to know when to exit a trade. It’s good to work with an experienced broker as they can show you how to be a disciplined trader who knows when it’s time to take a loss.
Being able to get short term profits is an advantage with CFDs. With regular stock, you would have to wait for several months to get returns whereas CFDs offer the ability to profit much sooner. Trading can also be done outside the market’s working hours.
Because CFD is a leveraged product, you’re able to maximise your market exposure for a small part of the investment required to trade the underlying asset directly.
The Costs of CFD Trading
- Spread – when trading the CFDs,you pay the difference between the buy and sell price. The narrower the spread, the less the price needs to move in your favour before you start to make a profit.
- Commission – for when you trade share CFDs. Commission on UK-based shares starts at 0.10% with a commission of £9 for instance.
- Holding costs – at 5pm New York time, any positions open in your account can be subject to a charge which is known as a holding cost.
- Market data fees – to trade price data for share CFDs, you will need to set the relevant market data subscription in motion for which a fee will be charged.
You can use CFDs to trade on the price movements of thousands of financial markets, and this is regardless falling or rising prices. You can profit because CFDs give you trading flexibility regardless of direction of prices. Trading CFDs can only work for traders if you’re clued up on the markets.
If you’re a new trader, just dying to tap into the profits the markets can provide, you need to rely on people with expertise and reputability and who keep your information confidential. Always go with a broker who is licensed and regulated as they meet high standards which have been set by regulators.
Your Money’s Safe and Sound
Regulated brokers segregate customers’ funds from the company’s own funds. They put this fund in a separate account, only selecting stable banks or financial institutions. This is a critical factor because then if the company goes under, the trader’s funds will be safely stored and won’t be secretly used to pay the company’s debt.
CFD trading is only possible with proper trading platforms and these must be able to be tailored to suit your needs. With different chart types and technical analysis suite, traders have all the tools they need to analyse the financial markets. The software featured with your CFD broker of choice is most important and should be user-friendly and also features plenty of trading tools. Not only that, it’s the ability to trade from wherever you are that is such a bonus and the right broker makes it possible for traders to keep track of their contracts with mobile trading from iPad, iPhone and Android.
Multi award winning CMC Markets with their 24 hour support and one of the world’s leading CFD trading providers offers traders access to thousands of instruments, so new and seasoned trader are guaranteed to find the instruments they want to trade and all the help and support they need.
These can be –
- shares
- forex
- indices
- commodities
- options
- binaries…and others
You’ll discover why trading with CFDs offer so many benefits over other kinds of trading apart from profiting even with a falling market.
Keep the Fun Aspect In
The beauty about CFD Trading is that you have access to global markets. This means you’re able to speculate on the price movement of the Wall Street Index if you like. You can do so much with right broker behind you. You won’t find get-rich overnight, but you’ll understand leverage, you’ll have a sound trading plan in place and you’ll have some fun while learning because you’ve all the right strategies in place.