What is CFD Trading? Contracts for Difference (CFD) trading are a method of trading or price movements related to products such as shares, treasuries, currencies, etc. It is the difference between the price where a product is entered and the price where it is exited. You actually never own the underlying asset but you realize the profits and losses obtained from it.
Traditionally in trading the prices are quoted as “bought” or “sold”. It is the same in CFD trading too. The asset you trade on will determine the price you invest and are charged a minimum commission on every transaction in equity or commodity. Non-equity transactions are more widespread. The currency used is that of the home market.
However, there are certain factors that should be kept in mind before you Trade CDFs online.
- The Account: The first and most obvious thing you need to consider is the type of account you want. Depending on your requirements and suitability you can choose from a standard account, a managed account or a mini account.
- The Risks: Any trade or transaction is carried out with the motive of earning profit and this involves risk. To keep your risk at a minimum use speculative capital to open the account and always consult a risk manager.
- The Process: You need to have knowledge about how you open a CFD live trading account. Usually you have to fill an application form and it takes from 3 days to a week to open.
- The Platform: There are numerous types of platforms to trade from. You have platforms which are faster or provide a higher leverage or have higher options of currency pairings. You choose according to your requirement.