Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Gold Bullish on US Fed Interest Rate Hike - 16th Dec 17
The LORAX Explains What Happened to Sheffield's Street Trees 2017 - 16th Dec 17
Bitcoin Trading Alert: Bitcoin Pauses – Will Appreciation Follow? - 16th Dec 17
SanDisk Ultra 128gb 100mbs Micro SD Card for Smartphone's Speed Test - 15th Dec 17
Inflation is Spiking Globally… Bond Bubble Bursts in 3… 2… - 15th Dec 17
Sheffield's 'Real' LORAX Defending the Trees From the Labour City Council Patrol Units - 15th Dec 17
Stock Market Decline Signals are Near - 15th Dec 17
Santa Is Putting Christmas On The Blockchain And Saving Billions - 14th Dec 17
The Unprotected, the Protected, the Vulnerably Protected Classes—Which Are You? - 14th Dec 17
Gold’s Upside Target - 14th Dec 17
Year-end US Interest Rate Hike Again Proves To Be Launchpad For Gold Price - 14th Dec 17
2 Charts That Might Define the Fed’s Jerome Powell Era - 13th Dec 17
UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - 13th Dec 17
Stock Market Elliott Wave Forecasts - Is the World coming to the end? - 13th Dec 17
A Method Traders Can Use to Confirm an Elliott Wave Count - 13th Dec 17
Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - 13th Dec 17
A Former Wall Street Veteran: Good Traders Are Born, Not Trained - 12th Dec 17
Buy Gold, Silver Time After Speculators Reduce Longs and Banks Reduce Shorts to Continue? - 12th Dec 17
Masters of Economic and Political Illusion – in Taxes, Debt, Government, and Markets - 12th Dec 17
Approved Used Land Rover Main Dealer Real Customer Buying Guide - Hunters, Chester - 12th Dec 17
Gold Price 100% Bullish Signal - 12th Dec 17
Epic Stock Market & Fixed Income Bubble Will Not End Well - 12th Dec 17
Bitcoin can be stolen. Although Can’t be hacked - 11th Dec 17
Have Stocks Reached A Permanently Rigged Plateau? - 11th Dec 17
Trying To Beat The System Is A Fatally Flawed Investment Strategy - 11th Dec 17
Is This The Beginning Of The Next Silver Rush? - 11th Dec 17
The Dow Gold Ratio - 11th Dec 17
Evidence of a Stock Market Top Mounting - 10th Dec 17
Bitcoin Doesn’t Exist – Forks and Mad Max - 10th Dec 17
Bitcoin Doesn’t Exist – Putting the Banks Out of Business - 9th Dec 17
China’s Struggle for Market Economy Status - 9th Dec 17
Is Gold Really Strong? - 9th Dec 17
Bitcoin Parabolic Mania - 8th Dec 17
SPX Make a 61.8% Retracement - 8th Dec 17
Gold, Stocks and Bonds - The 3 Amigos Update - 8th Dec 17
Gold Stocks Break, Gold to Follow - 8th Dec 17
4 Charts That Show How Trump Tax Cuts Will Trigger A Recession - 8th Dec 17
Precious Metals Breaking Down! 3 Amigos to Abort? 4 Horsemen to Ride? - 7th Dec 17
Bitcoin Just Smashed Through $12k… Wait, $13k… Now $14k… This Is Getting Ridiculous! - 7th Dec 17
Stock Market Tops Look Like This - 7th Dec 17
Crude Oil, Oil Stocks and Invalidation of Breakouts - 7th Dec 17
Bitcoin Doesn’t Exist – 2 - 7th Dec 17

Market Oracle FREE Newsletter

Traders Workshop

Beginners Guide to CFD Trading

InvestorEducation / Learn to Trade May 31, 2017 - 05:33 PM GMT

By: Submissions

InvestorEducation

So, you’ve been researching investing, or already have a degree of experience in investing in financial vehicles, and have come across Contract for Difference, or CFD, trading, and are wondering whether or not it is right for you. Maybe you’ve heard some success stories about individuals making huge returns on CFDs, or maybe you’ve been warned off them by people who have made huge losses. We’re going to dispel the myths, and give you the knowledge you need to start CFD trading.


How does it work?

Firstly, you need to know how CFD trading works. With CFD trading, you never actually own the underlying asset that the Contract for Difference is tracking, in stark contrast to trading assets. Instead of paying a commission, you pay on the spread when purchasing or selling CFDs. This will still mean that you spend a significant amount, but it is often less than the commissions and other fees that come with trading more traditional assets. To use an example, if you purchased 100 CFDs with an ask price of $40 from a broker, you would immediately display a loss on that purchase due to the spread. If the spread is 2 cents, then the underlying asset would need to appreciate by 2 cents to make up for the loss. If the stock appreciated by fifty cents, and you chose to sell, you would again lose a couple of cents on the spread. Instead of making a $50 profit on 100 shares you might make $48/$49.

The stories of large profits and losses come from the lower leverage needed with CFD trading. If you’re going into CFD trading with the hope to get rich quick, then you’re going into it for the wrong reasons – the huge success stories are the exception, not the norm. That said, those who have lost huge sums of money likely did so because they didn’t follow the basic rules of trading.

What’s your market?

Before anything else, you need to choose a market that you want to invest in. You should know this market inside out, to the point where you should have an idea of potential market upsets before they happen. You should know the various players and how they’re performing. You can be a fantastic mathematical analyst, but if you don’t have a wider fundamental understanding of the market, then you are at a major disadvantage.

Who’s your broker?

Once you have a chosen market, it is time to choose a broker. One aspect of CFD trading is that compared to other types of trading, it has relatively little regulation. This is great in many ways, but it does mean that choosing a reputable broker is even more important. It is important both to shop around for the best deal, and to thoroughly investigate any broker before you trust your money with them.

Keep track of your investments

So now it’s time to invest, right? Not quite. You need to create a comprehensive investment plan, in which you detail what trades you will make, the reasoning behind your trades, and what levels you will sell at for a profit/loss.  An integral part of this investment plan should be an investment diary, in which you track the details behind your trades, your emotional state, and what went well or badly.

If you go into CFD trading having researched the market, with an investment plan, and with an

This is an paid advertorial. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife