Thursday, December 15th, 2016

How to Trade CFDs

The term CFD stands for Contracts for Simply difference. The ‘difference’ That Means Referred to entre the buying price, the ‘offer price’ and the selling price or ‘bid price’ of a particular contract. The value of the contract is based on the value of Directly the Underlying asset. You are, howeve, not buying the asset today. If you buy a CFD on gold, for example, you are not buying gold Actually, urge, you are speculating on the price of gold. A CFD Broker Will Pay You The Difference between the market price at the Bought you, the ‘offer price’ and the price you sell Eventually the market, the bid price. If you buy a CFD Should based on the price of one ounce of gold and sell it again Immediately, You Will Lose the Difference between the offer price and the bid price, Which is part of the broker’s commission. Also be aware That Will Add Some brokers Each time you buy fees or sell to trade. As the day goes by, the bid price Might Exceed the original offer price you paid, in case the difference Which Will be your profit. The reverse is true if the price moves Against you, you lose the initial Will the offer price Difference between the bid price and the amount by Which plus the price of the asset dropped. Only if you buy a CFD are Convinced the price of the commodity, equity or currency Will it increase. Since interest paid on your must-be open position at the end of the day, Many traders prefer to terminate all trades Their closes Before the market. Since you are trading on the price of the Underlying asset, You Can Use Both technical and fundamental analysis to try and determine whether the price Will move up or down. If you believe it Will Increase, Entered into a long position, if you believe it Will Fall, take a short position. There are Some Difference Between Long and short positions with CFDs. On long positions, you pay interest and Receive Any Dividends Declared, every day. On short positions, and Stock You Must Pay Dividends Declared, But You Receive interest on your open balance. Since the value of a CFD Closely Reflects the value of the Underlying share, commodity or currency, You Can treat it in much the same way as if current trading in the Underlying asset. The difference is CFDs are leveraged instruments That. Could you trade with much more money Than You Actually Possessed, since you only pay a deposit to Have, Usually Between 14% and 35% of the total. For example, With a deposit of 14.000 expose yourself to You Could Profits and Loss on a total amount of 100.000. Would CFDs worth 100.000 Purchasing mean a deposit of 14.000 and You Could Potentially double your initial ‘investment’ if the price of the asset INCREASED by 14%. Would you make 14% profit, Which equals 100% on the amount you Actually invested. The reverse is true Also, if the price dropped by 14%, you lose your Entire 14.000 Would investment. To Protect yourself against Such a scenario, decide how much you are Prepared to lose and a stop loss at September That level. Never put all your eggs in one basket, Have a diverse portfolio and never Risk More Than What You Can Afford to lose on a single trade. Like the Risk warnings tell you trading CFDs is a leveraged investment product, a high degree it Involves Risk of capital to your dog and you incur Losses That Exceed your investment. Please Ensure That It matches your trading Objectives As It May Not Be Appropriate for all classes of investor. Ensure That You only trade CFDs with capital That You Can Afford to Lose. Before trading, Ensure That You are Fully Aware of the Risks Involved Obtain Independent Financial advice and if Appropriate.

A leading Financial author based in the Heart of London’s Canary Wharf. Thomas Bainbridge is respected commentator on Financial Markets, Including on the CFD and spread betting the markets

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