What Is CFD Trading?

What Is CFD Trading?

CFD trading, or otherwise known as ‘contract for difference’ trading is the selling and buying of CFDs.

CFDs are considered derivative products and allow people to speculate on markets such as Forex, commodities, shares and indices without actually buying or selling any of the assets.

A trader can engage in CFDs, or contracts that work between the broker and trader. Here, one would speculate on a price of a particular asset as it performs in current or future market conditions.

Keep in mind that the main difference in CFD trading and traditional platforms is that you won’t have to own the underlying asset. You just have to predict the price movement correctly in order to gain profit.

How to Begin Trading CFDs

A lot of people use metatrader 5 for cfd trading. It’s one of the most popular platforms and serves as an excellent point for beginners and veteran CFD traders alike.

A trading account is needed to begin CFD trading. Afterwards, you’re free to pick your instrument then choose your ‘position’, e.g., will it go up or down?

Choosing a position isn’t just done purely with luck. To have a chance of making money you will need to depend on solid indicators, signals and charts. It’s the same with trading on a traditional platform- there are strategies you must follow if you want to predict the correct outcome.

CFD trading is similar to working the stock market in that it doesn’t always guarantee success. To minimize the risk of losing money you will want to try a demo account first to ensure you’re comfortable before entering live markets.

The most common trading tools for CFD are expert advisors, economic calendar, strategy tester and analytical tools. You can choose from programs that use algorithms, an economic calendar where events are displayed and established tools such as Elliott Wave, Fibonacci and Gann objects.

John Norwood
John Norwood is best known as a technology journalist, currently at Ziddu where he focuses on tech startups, companies, and products.