E Introduction To CFD Trading

Successful CFD traders grapple with a number of different markets and positions each and every day, trying as far as possible to make the most of their time and research to find the most profitable investment opportunities. From time to time, it pays to get in early on trends and to take that little bit extra risk in order to boost your trading capital, and when these moves do pay off they can be enough to balance other losing positions and solidify trading profits. But at the same time, they do represent a marginally greater risk as compared to trading within a pre-defined trend, and healthy skepticism is important in ensuring you are best able to spot the profitable and avoid the less clear cut.

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Let’s take a step back and recap on what contracts for difference actually are. CFD’s are contracts between you and your broker where you buy/sell a particular financial instrument. Once you enter the contract, you will pay the difference (thus, the name “contracts for difference”), if you are right then you’ll be paid and if you’re wrong then you’ll have to pay the difference. CFDs are somewhat similar to options.

The main thing to remember here is that contracts for difference are derivatives and thus leveraged products, please make sure you understand the risks before trading CFDs.

Advantages of CFDs

  • Traded on margin: so you need just a margin compared to what you’d need if you traded real shares.
  • A wide range of markets: with CFDs, you can trade equities, forex, commodities, bonds, and much much more.
  • Easy to trade: with so many brokers, you are spoilt with the options. You can go for low spreads, or a range of markets, or for the broker reputation. You are literally littered with options. Trade whatever you want, whenever you want, it is up to you.
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