CFD trading guide

In this CFD trading guide, you will learn what is CFD trading. You will also learn how to become successful with an online trading strategy. People that trade CFD online have become quite numerous.
This online trading guide has become quite popular as a result. The reason for that is that people have become more successful. Let’s start with defining a CFD and how it differs from say, commodity trading.


What Is a CFD Trading Strategy and How Do You Use It?


The term CFD stands for contracts for difference. It is a financial instrument like stocks or bonds. The best strategy for CFD trading is to have traders place predictions on differences between the strike price and the closing price of any asset, based upon charts.

The strike price of an asset is the price that you bought it at. For example, suppose that you bought a Google CFD with the strike price of $100 a share. Although you don’t really buy it. You enter into an agreement with the CFD trading broker, which is why you need to make sure that you work with one of the top CFD brokers in world.

Your job from that point is to decide whether you want to enter a long position (buy), or if you’d rather get into the short position (sell) instead from your CFD trading platform. When you enter the long position you are not really buying and on the short you are not really selling.

Instead, you are using your best CFD strategy to predict whether the asset will go up or down. This is true for stocks trading strategies, FX trading strategies as well as other assets.

If you have correctly predicted the movement of the asset, you will have learned the difference between the strike price and the sold price of the contract, also called the closing price. If not, you will lose the same difference. This free strategy guide will help you determine which way to go and give you other CFD trading tips.


CFD List of Assets


When it comes to CFD the list of assets is absolutely enormous. You can enter a CFD on almost any asset you can think of. This will depend upon the CFD brokers that you work with. It is smart to know how to choose the best CFD broker from the list of online CFD trading brokers available.

With Forex, you also want to work with the top Forex brokers in world. Keep in mind that you may only be able to do currencies. If you find one of the top CFD platforms that also do Forex, then you can get into trades using precious metals like gold, commodities like wheat and oil, as well as stocks, bonds and many other instruments. The list of assets that you can trade on with top-rated CFD brokers is endless.

The only limit you have when it comes to assets what the broker you’re going through provides. This offers a great deal of flexibility to Traders and it explains why CFDs have become so popular in the financial world. The top 8 CFD brokers will offer a CFD trading tutorial to teach you strategies for stocks trading as well as online CFD trading. Including what assets they have available.


How CFD Trading Works


When you buy and sell a contract for difference, what you are doing is speculating about whether the price of an asset will rise or fall.  So, if you believe that an asset’s prices going to rise in the next month, you may be able to enter into a contract with a broker to make money if that happens.

It doesn’t matter what the asset is, or what your day trading strategies are. You are betting that the asset will rise. If the asset does rise, then you get the difference between the price that you bought in at and the price that you closed at. The online trading platform takes the opposite position and if you are wrong in your CFD strategies, and the price goes down, then the broker gets to deduct the difference from your account. That’s the downside of CFD trading online.


An Example of the Best Strategy for CFD Trading


Here’s an example of a CFD trade. You think that the stock of Google is going to rise. And you would like to enter a contract for it. Unfortunately, you only have $500 and just a single share of Google stock is $1,000.

So, instead you speculate on the price with a CFD. You get a leverage of 1:10 which means that you are able to speculate on five shares of Google stock, worth $5,000. With the only amount that you have to pay is the $500 that you have. This is the best strategy for CFD trading because you get the most profit potential for the least cash outlay. The best CFD trading strategies give you the most for the least.

Now imagine that the price increases to $1010 at the end of your CFD contract. You would get that difference for each share that you bought minus any spread that the broker takes.


Other Benefits of CFD Trading


CFD trading allows you to speculate on all kinds of financial markets and assets. It doesn’t matter whether prices are rising or falling. Because you are speculating on the movement of the price rather than actually owning the stock or currency. This also means that you aren’t going to have to pay taxes. Like the UK stamp Duty, in many cases.


The Popularity of CFD Trading


You may be wondering why these are so popular. It is because they have so many advantages, allowing investors to actively trade financial markets on all levels. Here are some of those benefits.

  • CFDs are tax write-offs in many cases. and you may not have to pay taxes.
  • CFDs are also flexible because you are allowed to trade on both the rising of an asset as well as the falling.
  • You’re able to use the margin to control a much larger trade, which means that you make more money.
  • You can structure your CFDs so that you can balance out your portfolio and offset any loss that you might encounter.


How CFD Trading Works


Once you have an account with a broker, you need to choose an asset that you want to enter into a contract for. Then you can choose a position that you want to take. In addition, you want to select the amount of CFDs that you want to trade.

If you click buy, your profits will increase with each amount over the buy-in figure that that asset appreciates by. If the price falls then you will have to pay for every point it loses.


How to Trade on Falling Markets


Let’s discuss for a moment how to trade on the falling markets. If you think the market might decrease in value, with CFD Trading you can go short or sell. If you are right then you can make a profit from the price drop.


How to Hedge Your Trades


One of the big benefits of CFDs is that you are able to short sell and make money. That is why many investors use this type of trading to do what is called hedging there are other Investments. An investor could be covered on a particular asset no matter if the price goes up or down.

For example, if you have shares in a particular stock, and you think that that stock prices going to go down but you don’t want to liquidate your stock, you could enter into a CFD and protect your portfolio. The loss that you would experience from the price drop would be offset by the money that you earn from the CFD.


Leveraging With CFD Trading


One of the advantages to CFD trading is that you can use leveraging to pay just to fraction of the amount of the entire contract. A CFD may start at around 2% of the total investment amount which is a much smaller margin then other types of trading.

Of course, you do have to keep in mind that with the increased potential for profit, you also have an increase potential for loss if the asset goes the other way from what you are predicting. Make sure that you are managing your risks appropriately.


Which CFD Markets Are Available?


There are a number of CFD markets that you can trade in. Services such as the City Index offers more than 5,000 CFD markets that span several categories of assets. For example, you can do CFD trading on in indices like the S&P 500, Dow Jones, Forex trading with currency pairs, shares in major companies like Google, Apple and Amazon as well as in commodities like gold, wheat and oil. You can even trade in bonds and options.


Deciding if CFD Trading is Right for You


Only you can decide if CFD trading is right for you. CFD trading is perfect for investors who want a better return for their money, which is just about everyone.

If you do not like to take unnecessary risks, then you may want to try a safer mode of investing. While this method does have bigger returns, there are times when you are going to be wrong about the direction of an asset and lose money.

CFD trading is more of a short-term investment strategy that does require that you take more active role in your Investments. If you are the type of person that prefers to allow your Investments to slowly increase in value over time, this may not be the style for you.