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 flirts with daily highs, retargets 1.1900
EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.
GBP/USD remains well bid around 1.3650
GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.
USD/JPY edges up above 153.50 with all eyes on US CPI figures
USD/JPY appreciates above 153.00 but remains on track for a 2.4% weekly loss. Trading volumes remain subdued on Friday, ahead of the IS CPI release. The Yen remains supported by hopes of a stable government and calls for further BoJ tightening.
Editors’ Picks
EUR/USD: Yes, the US economy is resilient – No, that won’t save the US Dollar Premium
Some impressive US data should have resulted in a much stronger USD. Well, it didn’t happen. The EUR/USD pair closed a third consecutive week little changed, a handful of pips above the 1.1800 mark.
Gold: Metals remain vulnerable to broad market mood Premium
Gold (XAU/USD) started the week on a bullish note and climbed above $5,000 before declining sharply and erasing its weekly gains on Thursday, only to recover heading into the weekend.
GBP/USD: Pound Sterling remains below 1.3700 ahead of UK inflation test Premium
The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Bitcoin: BTC bears aren’t done yet
Bitcoin (BTC) price slips below $67,000 at the time of writing on Friday, remaining under pressure and extending losses of nearly 5% so far this week.
US Dollar: Big in Japan Premium
The US Dollar (USD) resumed its yearly downtrend this week, slipping back to two-week troughs just to bounce back a tad in the second half of the week.
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