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03/19/2018 at 11:17 #3033
CFD is the abbreviation of Contract for difference. The best thing about CFD trading is that it allows one to take a place on the price of an asset without actually owning it. The most outstanding benefit of CFD trading is that it allows you to make a gain from markets that are on the falling trends as well as those ones that are on the rise.
How Do CFDs Work?
As suggested in the definition, a CFD works by creating an agreement between twoparties. The parties involved agree on the movement of an asset.
Features of CFD trading
This type of trade has a few features that make it equally exciting as it is unique. Below are the major features:
• They are leveraged
They are not only available for currency traders but also other global markets including shares, commodities, indices, and EFTs.
• A trader stands a chance to get both losses and or profits from the falling or rising prices.
• They are derivative products
How CFDs Trading Works in Regards to Forex Trading
In this trade, you do not have to buy or sell the currency pair in question. You just need to buy or sell a number of units of the particular pair. The judgment is purely based on your thought of whether the prices will take an uptrend or a downtrend. Our forex trade allows you to CFD trading on different currency pairs.
So how do you benefit? You get points each time the currency pair of choice takes a move in your favor. You will gain multiples that are equal to the number of times of your CFD units. Each time the price of the select pair that is on CFD trade takes negative moves, then you are in for a loss or losses. It is advisable to be very careful in cfd trading because at any given time, your predictions could actually go wrong and your losses could outweigh your deposits.
Being a leveraged product, CFD trading does allow an investor to trade on a certain percentage of the entire value in order to open a position. Experts call this trading on the margin. While trading on the margin does allow you an opportunity to reap more returns, it could also end up giving you more losses because returns are based on the value of CFD position.
Costs of CFD Trading
• Market data fees
This is the subscription charge in order for one to view the prices of the existing CFDs. The market data fee is the amount of money that you will pay to activate your subscription into the CFD trade.
• Holding costs
This is the cost of any positions that are still open at a certain time of the day could be 5pm but this could vary depending on your location. A holding cost can either be positive or negative but this depends on the trends as well as the applicable holding rate.
This is the difference between a buy and sell price. If you want to trade in CFDs, then this is a must pay. In order to enter a buy trade you will pay the buy price as quoted in the CFD and upon exit, you will be required to use the quoted sell price. If the spread is narrow, then you do stand a chance of making good returns with a slight move of the prices in your favor, the same applies to making a loss if the price takes a move that does not rhyme your prediction. We have competitive spreads to all our clients who wish to take part in CFD trading.
It is worth noting that CFD trading is charged a commission on opening and on the closing time. These commissions are known as entry and exit prices.
Like many other trades, CFD traders are encouraged to take some time before investing their capital. Make full use of the demo accounts and make predictions using virtual money. When you are sure about your skills, then you can trade with real money.
03/27/2018 at 02:39 #3101
Thanks, Vic, this is really valuable.