What are CFDs in Trading ?

C.F.D are know as Contracts for difference (CFDs). You have the possibility to trade on various price movements on many various global financial products. You can find indices, commodities, treasures and also currencies, shares..

Trading the CFDs is that you do not buy or even sell the underlying asset, the physical share. What you do in this kind of trading, is that you either buy or sell a certain number of units. It’s depends of your judgement, if you think for instance a price will go up or down. You will gain several number of units that you have previously bought or sold, if the price moves in your side. If the price is against you for each point you will make a loss. You need to be really careful because sometimes you can exceed your deposits.

CFDs looks easy but it takes a certain time to be able to have some positive results. The benefits of CFD trading are basically that you have the option to trade on margin. In fact you can either choose to go short when you think the price is going down or you can as well use CFD to hedge your portfolio.

What are CFD margin and leverage?

If you choose to try CFDs you are going to discover a product which allow leverage. That means that you can use a small deposit of the entire value of the trade, if you want to trade. You will then at that moment trading on margin. It is possible to have a good return on investment with the trading margin however we need to consider as well the losses because they are based on the full value of the position. It is possible to lose all your deposit and more. That’s the reason why before trading CFD you need time to understand the principles of it.

How much cost a CFD trading?

It depends of your broker how much they will charge you. Basically trading CFD you will have to pay the spread which is the difference between the buy and sell price. You will have to pay as well a charge when you will trade share CFDs. You can have to pay a charge for long and short positions, and forex positions.

Also for each position that you hold on your account, at the end of your trading day, if you do not close your position then you will have to pay a charge, that’s the holding costs! If you hold that position (negative or positive) you will have the holding rate’s charge apply.