If you believe that the price of certain asset will go up or down and want to obtain a return (profit) from it, and you don’t want to risk a lot of money but want to invest like you have a lot of money, then CFD (Contract for Difference) trading allows you to get in the market easy and fast.
In ForexSQ we recommend you to open an account in a CFD broker and deposit funds. The deposit requirement for every position in CFD trading is only a fraction of the traditional trade (where the trader owns the assets) so with the same capital you can have a much larger portfolio. Leverage is what allows you to hold positions larger than what your capital would allow.
The world of CFD trading includes forex, shares, indices, bonds and commodities. When you open, for example, a long position, you don’t actually own that asset but your return will increase if the price of the underlying asset goes up and your capital will decrease if the price falls. If you consider that the price of gold will fall, you can profit by going short on gold, you just have to decide on the amount of the contract, which should have relation with the capital you invest, how much you want to gain and how much you are willing to lose.
If you think the euro will fall against the US dollar and you want to profit from it, you can go to an exchange house, sell euros and buy US dollars, say for example €100. If the euro actually falls 1% against the US dollar and you rebuy euros, you will have earned €1. If instead of selling the euros physically, you do the same operation using a CFD broker, with a deposit of €100 your gains could have increased, for example, from €1 to €100 (minus a minor commission); and all the process could have been done from a cell phone, a tablet or a computer from anywhere in the world.
Multiple assets, leverage, 24-hour trading and the possibility of going long and short, open up gigantic opportunities but also relevant risks. As a trader is important to consider the capital risk you take when you trade. You can double or triple your initial investments but as you don’t own the asset, you can lose most of your money.
Many brokers offer CFD trading through different platforms and they also allow you to test them with demo accounts before opening a real account. It is important to test everything before involving real money: financial instruments, software, trading systems, etc. The difference between real and demo accounts are usually slight; sometimes spreads (difference in a specific contract between ask and bid price) can vary. Having positive results on a demo account is probably the first step to complete before going real in the CFD trading world.
Risk Disclosure Analyzing your financial situation, you should decide whether you should start Forex trading or not. Rates of currencies can go down or rise higher any day, any hour, any minute so you should risk only that much which you can afford to loose.
Editors’ Picks
EUR/USD remains offered below 1.1800, looks at US data
EUR/USD is still trading on the defensive in the latter part of Thursday’s session, while the US Dollar maintains its bid bias as investors now gear up for Friday’s key release of the PCE data, advanced Q4 GDP prints and flash PMIs.
GBP/USD bounces off monthly lows near 1.3430
GBP/USD is sliding in tandem with its risk-sensitive peers, drifting back towards the 1.3430 area, its lowest levels in the month. The move reflects a firmer Greenback, supported by another round of solid US data and a somewhat divided FOMC Minutes.
Japanese Yen hangs near one-week low vs. USD amid worries about Japan’s fiscal health
The USD/JPY pair gains positive traction for the second straight day – also marking the third day of a move up in the previous four – and climbs to over a one-week high, around the 155.35 area, on Thursday. Spot prices, however, retreat a few pips during the early European session and currently trade just above the 155.00 psychological mark, up nearly 0.20% for the day.
Editors’ Picks
AUD/USD shrugs off losses, retargets 0.7100
AUD/USD partially fades Wednesday’s pullback, managing to regain balance, leave behind the earlier drop to the 0.7020 zone, and trade with modest gains ahead of the opening bell in Asia. Moving forward, the preliminary PMIs will be the salient event in Oz on Friday.
EUR/USD remains offered below 1.1800, looks at US data
EUR/USD is still trading on the defensive in the latter part of Thursday’s session, while the US Dollar maintains its bid bias as investors now gear up for Friday’s key release of the PCE data, advanced Q4 GDP prints and flash PMIs.
Gold surrenders some gains, back below $5,000
Gold is giving away part of its earlier gains on Thursday, receding to the sub-$5,000 region per troy ounce. The precious metal is finding support from renewed geopolitical tensions in the Middle East and declining US Treasury yields across the curve in a context of further advance in the Greenback.
XRP edges lower as SG-FORGE integrates EUR stablecoin on XRP Ledger
Ripple’s (XRP) outlook remains weak, as headwinds spark declines toward the $1.40 psychological support at the time of writing on Thursday.
Hawkish Fed minutes and a market finding its footing
It was green across the board for US Stock market indexes at the close on Wednesday, with most S&P 500 names ending higher, adding 38 points (0.6%) to 6,881 overall. At the GICS sector level, energy led gains, followed by technology and consumer discretionary, while utilities and real estate posted the largest losses.
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