Want to start CFD trading? Or want to learn to trade CFD’s? Then it’s important that you choose a reliable and suitable broker that is officially regulated. A broker that is regulated is not scam and you can be sure it’s reliable.
What is a CFD?
A CFD is a contract for difference. With a CFD you can trade raw materials, like for example oil, silver, sugar, tea or gold. The biggest advantage of trading CFD’s is, that you can trade with a limited investment, while this is still a significant amount. Most online brokers offer CFD trading, like Fortrade, IC Markets, Plus500 and IG.
You can compare CFD’s with leveraging products, like options, but CFD’s work in a more simple way than leveraging products. Another difference between CFD’s and leveraging products is, that CFD’s don’t expire and don’t lose time value. Many online brokers offer CFD trading, like for example Markets, IG or Plus500.
Another big advantage of CFD trading are the low costst. Most brokers don’t charge commission. The reason why they don’t do this, is because the trading costst are covered by the bid/ask spread and by the premium you pay when you don’t close the position.
An example of CFD trading
You want to buy 5 Google shares at 500,00 dollars each. Normally you would pay for this total amount 5 x 500,00 = 2500 dollars. If you trade with CFD’s for 5 Google shares on the Plus500 platform, the initial margin is only 10%: 250 dollars
This means that you can take a position of 5 google shares, with a small investment of 250 dollars and you will still enjoy the total increase of these 5 shares.
As explained before a CFD is a ‘contract for difference’. So, if Google increases to 550 dollars and you sell these CFD’s, you will make a 300 x 5 = 1500 dollar profit. Your investment of 250 dollars has become 1500 dollars. This is how a CFD trading works: you will get the difference between the opening and closing value of a particular trade, without a whole investing amount.
CFD trading advantages
CFD trading has many advantages, like:
- A lare profit with a limited investment
- No commission
- Making money by speculating on rising and falling markets
- A stop-loss you can choose. This means you decide the risk you want to take
- You have no risk of losing more money than the money that’s on your account
Want to start CFD trading?
Want to start CFD trading? Or do you want to learn more? Open a free demo-accounts. With a free demo-account, you learn trading with CFD’s on shares, indices and raw materials. Or open a real account right away and start CFD trading.