Sep 15 2020 0
CFD is a contract for difference in price between different underlying assets. Usually these are assets that are traded on financial markets. CFD online trading is when one party agrees to pay the other party the difference between the present value of an asset at the beginning of the period and its value at the end of the contract. In which, this contract does not refer to the transfer of ownership of the underlying asset itself.
What is CFD online trading?
The basic concept of a CFD online trading is as follows: it is a contract between two persons that states that one must pay the other the difference between the present value of an asset and its value at a future date. When you trade CFDs, you don't own an asset, which will provide you an efficient way to profit from price fluctuations. Contract for difference is an investment tool that allows investors and speculators to engage in price movements of currencies or indices without owning them. Contract for difference (CFD) is a contract between two parties to exchange, at the end of the contract, the difference between the opening price and the closing price of the contract is multiplied by the number of shares by the means of contract. There are always two parties involved in CFD trading, the buyer and the seller. At the end of the contract, if the price of the investment instrument increases, the seller pays the difference to the buyer; if the price falls, the buyer pays the difference to the seller.
The characteristics of CFD online trading
CFD trading allows for the use of leverage, at around 10%. You may have to pay a commission fee of about 0.1% of the contract value for opening and closing trades, but it is up to the broker.
CFDs provide a quick and convenient tool to reach a wide range of markets but are also dangerous for the reckless. The real benefit of CFDs is the amount of leverage that can be used to trade any financial instrument. You can see worldwide stocks, commodities, assets, currencies and indices all offered by CFD brokers, making it simpler and more time-saving.
How CFD is traded
A contract for spread allows you to open a trade with an trading asset without having to buy or sell the asset. The value of the contract is determined by the number of shares multiplied by the price. The result of CFD contracts is determined by fluctuations in share prices. When you close the trade, the profit / loss will be determined based on the difference between the opening value and the closing value of the contract. Hence, it is called the "Contract for Difference".
The advantages of CFD online trading
- Make money with any market trend: increase or decrease in the price of an asset.
- Options from a wide variety of different markets and trading tools.
- Make money in international commodities and capital markets with a relatively low start-up capital.
- Preventing financial risks from future price fluctuations.
- Receive dividends per share (if the underlying assets on a CFD contract are stocks).
- Why you should trade CFD online
- Flexible Leverage: CFDs are traded with leverage, which means you can trade in the market with a volume greater than the volume you can trade before.
- Buy or sell: CFDs give you an opportunity to buy assets if you think the market is in an uptrend and sell the assets if you think the market is in a downtrend.
- Risk Management: The ability to sell means you can surround your asset trading thereby reducing your risk in the market.
- No expiration date: Contract has no expiration date and is effective from the date the order is placed.
That's all the basic knowledge you need to know about CFD online trading. If you are interested, you should look for a trusted broker right now to start trading for free with their demo account.