CFD trading means buying and selling CFDs. ‘CFD’ stands for contract for difference. They are derivative products because they allow you to participate on financial markets, stocks, currency pairs, indices, commodities without the need to own the assets themselves.
How CFDs work?
Let’s see how CFDs work. A good point to start is traditional investment. If you wanted to invest in commodities, you would buy a bar of gold or a barrel of oil, for example. After you would wait for the moment when the price would go up and you would sell the gold or oil and make profits out of the difference in the price you bought it with the one you sold it.
CFD trading operates the same logically. You place a position on a certain asset on a certain price, sit back and wait for the price to go up or down and make your profits or loss on the difference of the prices. The main difference between traditional investment and CFDs stays at this fact: you never own the asset. The trader will not buy/sell the asset, he/she will speculate on the direction of the asset.
Advantages of CFD trading
These days forex trading has grown in popularity and we are decided to make you take advantage of this outstanding opportunity. We are providing negative balance protection, which mean you will never go under zero. The maximum you can lose is what you have invested.
Earnings Potential in Bear and Bull Markets
CFD trading creates unlimited opportunities to make profits in both markets, when it goes up and down also. You will be able to capitalize on any type of price movements.
With more flexibility in going after trading chances, traders have more control over how, where, and when they open positions in a market.
Greater Leverage in Trades
In traditional investments, traders should invest 100% of the capital needed to open a certain position. In the most standard way of trading, purchasing stocks, if the trader wanted to open a position on $ 1,000, he needed to have all this amount of capital.
Now the requirement for opening a position is 5 percent. The other part is covered by the leverage. With less amount of capital required to place a position, the trader can open more positions with the other amount of capital available. If the trader wants to open the same position for the chosen stock, which requires $1,000, he needs to invest $50.
Flexible Lot Sizes
While traders are still beginners and do not have the confidence to take big steps, we encourage them to walk slowly but securely, using small trading size, small lots. Once the trader feels confident, they are encouraged to go with larger lot sizes.
No Expiration Date
Not as it happens to other trading instruments, CFDs are not under the time pressure of devaluation. They do not have an expiration date and they have fewer restrictions on closing the positions compared to other types of trading instruments and derivatives. Maybe daily traders do not feel it, but long tern investors might go through different cycles of the market and wait the right moment to hit it with their strategic moves.