Trade CFD Online: A Beginner’s Guide

Trading CFD online gives you an opportunity to access financial trading assets at a fraction of their real value, achieving high-profit margins through leverage.

A CFD is an acronym for a contract for difference a novel type of trading that enables you to trade in commodities without, wait for it… the need to fully own them. Astounding inst it? Think thousands of indices, commodities, currencies, shares, bonds and interest rates from all major world markets at a fraction of their actual costs at your fingertips..literally.

How to trade CFD Online

To trade CFD online, all you need to do is select your preferred market, then open a CFD with your preferred broker. If you are interested in shares from a particular high flying company, you could if you are Mr. Moneybags, contact your stockbroker and purchase as many of those shares as you’d like.

If you are not willing or able to part with large sums of capital to physically own these shares, you can instead through a  CFD trading platform, open a CFD for the number of shares you’d like to trade with from that same company. The CFD agreement ensures that you and your CFD provider pay each other the change of price in the shares you have chosen.

You will need to supply a margin deposit and then enjoy huge leverage on your capital and potential profits if you have speculated right on your shares of choice. If the prices move to the opposite of your expectation though, you will then have to pay your CFD provider the difference in the value of the CFD once it closes.

What is the process of trading CFD online?

The very first step in trading CFD online is, of course, choosing a market of your choice. This requires an extensive technical and fundamental analysis so that you can make profitable trading choices. Once you are settled on an asset of choice, you can then proceed to your CFD trading platform and initiate a trade.

After selecting your trade size, ensure that you set stop loss orders to guarantee that your trade closes at a manageable position perchance it moves away from your favor. All you need to do from here onwards is monitor your trade in real time and exit when your trading goals have been achieved.

Benefits of CFD trading

    • With CFD online trading you can access thousands of trading assets worldwide all under one roof.
    • Highly leveraged accounts mean that you capital stands a chance of higher profits with every trade. The margin, which is your capital in the CFD covers only a fraction of the actual value of the assets you are trading with. Leverage though can amplify profits and losses as well so use it very carefully.
    • CFD trading allows you to take a long position in trade and a short one as well. The short position of trade allows you the flexibility to trade on assets whose price or value is speculated to be falling and make a profit out of it.
  • CFD trading allows you to take a hedged position to minimize risk, prevent losses and limit risks in future trades.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.