What is CFD Trading?

What is CFD Trading

What is CFD Trading?

The full form of CFD is “Contract for Difference.” It is a contract between a buyer and a seller where Profit/Loss settlements are made through the netting of cash payments and not by the physical delivery of financial instruments. This is considered an easier method of settlement as both the losses and the gains are paid in cash.

CFD trading renders investors with all the benefits and risks of owning an instrument without actually owning it.

When we trade CFDs, we buy/sell a number of units of a particular instrument, which can be a stock, an index, a forex pair, a commodity, a bond, and a cryptocurrency.

Various CFD products 

There is a large range of CFD products ranging from shares to commodities to index.

A trader can buy or sell shares of best blue-chip companies such as Facebook, Google, BMW, Apple, and can benefit from price action.

Let’s assume that you want to trade gold. The best ways to speculate on the gold price is via gold CFDs; it helps traders to profit from the price movement without actually buying the physical gold. Capital Street provides more than 10 commodities.

An index is used to measure the performance of a particular set of stocks which are listed on a particular stock exchange. A trade can speculate on the daily movement of the index and attempts to profit from price action.

Advantages of CFD trading 

  • CFDs allow traders to trade the market from either side (long or short), i.e. a trader can attempt to profit from rising prices as well as falling price.
  • At Capital Street, a trader can trade CFDs with leverage. That means a trader can open al larger position with lower capital which maximize the profitably of a trader.
  • A vast range of tools and trading platforms allow a common trader to compete with institutional traders.
  • One of the key advantages of trading CFDs is you don’t actually own the physical product, which makes it more easy and convenient.

How to trade the first CFD?

Are you excited to trade your first CFD? Awesome!

Follow these simple steps.

Step 1:- choose the instrument which you want to trade.

Let’s assume that you want to speculate on gold. If the current market price of gold is 1570 per ounces, then the price of one CFD will also cost the same.

Step 2. Choose the size of your trade 

Capital Street provides high leverage up to 200 times of the capital. With the help of the right strategy, a trader can maximize his probability. If you want to invest 100 dollars in gold CFDs then with the help of leverage, you can open a position of 20000 worth of gold CFD.

Step 3. Choose to go long or short 

CFD trader has an advantage as he can trade the market from both sides, i.e. he can go long or short base on his analysis.

Step 4. Close the deal 

Exit the position when the market reaches the desired target or if the market goes opposite side and hits your stop loss.