In the financial market CFD (Contract for Difference) represents the contract between the buyer and seller where the seller pays the buyer the difference between the opening and closing prices of the contract. In case the difference turns out to be negative it’s the buyer who pays and not the seller.
Traders have a chance to take an advantage from price moving up and down. In case of prices moving up they can open long positions and while the price moves down similarly they are free to open short position speculating on the market.
CFD trading is realized by individual traders and CFD providers. As there do not exist standard contract conditions each CFD provider specifies his own. It is opened when starting to trade on a specific instrument with the CFD provider.
When closing the position the difference between the opening trade and the closing trade turns out to be loss or profit. In case the CFD does not expire those positions that are remained open overnight will be rolled over.
Since CFDs are traded on margin the trader should keep the minimum margin level all the time to keep the position open. In case the sum of money deposited falls below the minimum margin level the trader will get a margin call and he will have to pay additional money into account. In case of not quickly covering these margins, the positions will be liquidated.
CFDs give you an opportunity to open long and short position. You choose Long Trade when buying an asset and expecting its further rising. In case of Short Trade you sell an asset expecting the price falling as you will be able to buy it back at a cheaper price. In the ordinary share market shorting is hardly possible, however CFDs let you go short as easily as you go long. It provides you with the ability to make profit even if the asset price drops but you trade in the right way.
Advantages of Contracts for Difference (CFDs)
Risks of Contracts for Difference (CFDs)
The whole logic of CFD trading is quite simple and has much in common with traditional currency trading. You can find Equity CFDs on Equities, Stock Indices and Commodity CFDs, containing more than one hundred trading tools, on the trading platform NetTradeX.
Traders have a chance to take an advantage from price moving up and down. In case of prices moving up they can open long positions and while the price moves down similarly they are free to open short position speculating on the market.
CFD trading is realized by individual traders and CFD providers. As there do not exist standard contract conditions each CFD provider specifies his own. It is opened when starting to trade on a specific instrument with the CFD provider.
When closing the position the difference between the opening trade and the closing trade turns out to be loss or profit. In case the CFD does not expire those positions that are remained open overnight will be rolled over.
Since CFDs are traded on margin the trader should keep the minimum margin level all the time to keep the position open. In case the sum of money deposited falls below the minimum margin level the trader will get a margin call and he will have to pay additional money into account. In case of not quickly covering these margins, the positions will be liquidated.
CFDs give you an opportunity to open long and short position. You choose Long Trade when buying an asset and expecting its further rising. In case of Short Trade you sell an asset expecting the price falling as you will be able to buy it back at a cheaper price. In the ordinary share market shorting is hardly possible, however CFDs let you go short as easily as you go long. It provides you with the ability to make profit even if the asset price drops but you trade in the right way.
Advantages of Contracts for Difference (CFDs)
- Availability to trade on margin which will help you enhance your trading capital
- Making profit from market rising and falling
- Lack of taxes and hidden commissions which results in cost reduction
- Availability of at least 80 stock CFDs, major Equity Indices and commodity CFDs
- Availability of unique Golden Instruments
- Providing favorable and beneficial Swap conditions
Risks of Contracts for Difference (CFDs)
- Availability of trading on margin not only increases the extent of profit but also losses. Therefore you should place stop loss order to escape large losses in case your position moves against you.
- It is more risky for long term investors; by holding a CFD open over a considerably long time the costs may increase and it would be more beneficial to have bought the underlying asset.
The whole logic of CFD trading is quite simple and has much in common with traditional currency trading. You can find Equity CFDs on Equities, Stock Indices and Commodity CFDs, containing more than one hundred trading tools, on the trading platform NetTradeX.
Editors’ Picks
EUR/USD holds below 1.1700 despite Fed rate cut, US Jobless Claims data eyed
The EUR/USD pair posts modest losses near 1.1690 during the early European trading hours on Thursday. However, the US Federal Reserve's dovish rate cut on Wednesday could weigh on the US Dollar against the Euro. Traders await the release of the US weekly Initial Jobless Claims report, which is due later on Thursday.
GBP/USD softens as traders eye BoE rate cut next week
The GBP/USD pair trades in negative territory near 1.3365 during the early European trading hours on Thursday, pressured by the rebound in the US Dollar. Nonetheless, the potential downside might be limited after the US Federal Reserve delivered a rate cut at its December policy meeting. Traders brace for the US weekly Initial Jobless Claims report, which will be published later on Thursday.
USD/JPY drops further to test 155.50 amid less hawkish Fed
USD/JPY stays deep in the red after testing 155.50 in the Asian session on Thursday. The US Dollar weakens against the Japanese Yen after the Federal Reserve lowered interest rates in a widely expected move, expressing concerns over the labor market conditions. The US weekly Initial Jobless Claims are in focus next.
Editors’ Picks
AUD/USD holds lower ground near 0.6650 after mixed Aussie jobs data
AUD/USD holds lower ground near 0.6650 following the release of the mixed November Australian jobs report, which showed the Unemployment Rate held steady at 4.3% in November. This, however, was offset by an unexpected fall in Australian Employment Change, dragging the pair away from its highest level since September 17.
USD/JPY drops further to test 155.50 amid less hawkish Fed
USD/JPY stays deep in the red after testing 155.50 in the Asian session on Thursday. The US Dollar weakens against the Japanese Yen after the Federal Reserve lowered interest rates in a widely expected move, expressing concerns over the labor market conditions. The US weekly Initial Jobless Claims are in focus next.
Gold: $4,250 remains a tough nut to crack for buyers
Gold is testing bearish commitments at the $4,250 psychological level on Thursday, pausing a two-day uptrend as markets weigh a less hawkish than feared US Federal Reserve policy announcements.
Cardano flips bearish as derivatives markets flout network growth
Cardano extends losses by 5% at press time on Thursday, following the 3% decline on the previous day and breaking the local resistance trendline. Derivatives data indicate a bearish shift in the narrative, as Open Interest and the number of active long positions decline.
Fed projects only 50 bps of additional rate cuts between 2026 and 2027; lifts GDP forecasts
The Federal Open Market Committee’s (FOMC) latest dot plot, released on Wednesday, indicates that interest rates will average 3.4% by the end of 2026, in line with the September projection.
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