What is CFD's ?
Contract for Difference (CFD’s) is a form of derivative which gives you access to trade thousands of products like Forex, Commodities, Shares, Indices and other financial instruments.
A CFD is an agreement to exchange the difference between the values of underlying asset from the time the contract is opened until the time at which it’s closed.
Contract for difference also called CFD’s gives you access to trade financial instruments on leverage, which means with small deposits you can trade with bigger exposure in the market and can take the advantage of rising or falling markets.
CFD’s gives you access to speculate on the price of underlying financial asset where you can go Long or Short without owing the product asset.
How to trade CFD’s?
CFD’s trading allows you to speculate on the future price of the particular market, where in the same traditional trading way you will find two prices i.e. bid price and ask price.
If you predict that the market will go up, then you will Buy on the ask price and if you predict that market will go down then you will Sell on the bid price.
It is important to understand the BUY and SELL of CFD’s:-
BUY a CFD means when you buy at a lesser price and sell at a higher price and the difference is your profit.
SELL a CFD means when you sell the product first at the higher price and close the position at a lower price with the difference being your profit.
Sometimes it is difficult for clients to understand the concept of SELL a CFD which is also called as Short Sell in financial market. Which means when you sell any product thinking that the price of that product will fall from the current price, as you are trading in the price of the product and not owing anything physically, so you can do the Short Sell and take the benefit from two-way CFD trading market.
Advantages
1. Trade a huge range of Assets – With CFD’s you can trade more then thousands of products like Forex, Commodities, Indices, Shares and more.
2. Trade with Leverage – When you are trading in CFD’s you know you are trading on Leverage which means, if you go long or short in the market you just need to maintain fraction of the total exposure, also called as “margin” to place the trade.
For Example – If you want to go long for 100onz of Gold, then the minimum margin you need to maintain is 1% of the total exposure. For instance, if Gold price is 1250$ then your total exposure in the market will be 125,000$ but with CFD’s you need to maintain minimum margin of 1250$ in your account to take the position.
But remember your profits and losses will be on the total exposure and not on the margin amount.
3. Two-way market Go “Long” & “Short” – CFD’s gives you a benefit to trade on both sides of the market. So, if the market is going up you can go “Long” and if market is going down you can go “Short”.
When you trade on the CFD’s platform, you will see two prices where one is for buy if you think market will go up and another is sell if you think market will fall so you can short your position and take benefit of both sides of market.
4. Trade Anywhere – CFD trading platform gives you access to trade in thousands of products with mobile or web platform. It is designed and built individually so you can trade anywhere you are.
5. Flexibility to trade – There is no restriction to trade on the lot size or the number of shares. You have a flexibility to trade mini, micro & standard lots according to the investment size.
