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 trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.
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