CFD TRADING PLATFORM IN FOREX TRADING

13 February, 2020 by No Comments

In today’s topic we will talk about best CFD trading platform. CFD is the abbreviation of Contract for Difference, in this type of contract you do not possess the value of the properties. This is a kind of optional trading product, another way to profit from forex. The properties can be anything that traded in the market. They are commodities such as oil, corn, coal, gold or stock and bond of any financial entities, currency pairs or even index in the stock security market like NASDAQ or JSE, FTSE. Therefore, in this scenario, you are not trading the value of properties, you are trading with the deviation in the future value of properties. 

Leverage

The most important factor in CFD trading is the leverage and it makes out the best CFD trading platform. It allows traders to invest a small percentage of the total value of the property and a third party will cover the remaining value under a form of a loan contract. The balance of trader’s account will be used as a security deposit for lost but in return, there are attractive profits for traders in the future. Let’s take a look at the scenario, you buy 200 USD of oil in CFD with the price of 200 USD per barrel. If the value of oil goes up 3 USD per barrel you will make a profit of 3 USD. Now you use the leverage of 10:1 (or 10% margin), you buy 2000 USD of oil and earn 30 USD with the same investment of 200 USD. you will see that you make amazing profit ratio of 30%.

How to get in a CFD contract

The first thing you need to do is choosing a famous and reliable broker to open an account. As you may know, there are some documents that you need to submit such as residence registration, water and electric bills. When your account is activated, then you can make your first trading. 

Is CFD just a gambling

It can be gambling according to the way you deal with it. If you do research before trading and deal with it seriously like any of your investments, it is not gambling for sure. The most vital thing that you need to keep in your mind is that the risk of leverages and your deposit is just a small amount of total value of your trading and if the market fail you, you can lose much more than your deposit. 

So, this is the reason why you should use stop orders. It means that your trade will be automatically stop if the market goes against your expectation. High spread can spoil your potential profits. Therefore, it is very essential to choose your right trading tools and strategies.

Short selling in CFD contract

Another thing which make CFD the best trading platform is short selling. Short selling is used when you see the value of properties will go down in the future. You will sell at a high price and then buy them back with a lower price and earn profits according to the differences. You can find more details about short selling in the next article.

Margin call

You must pay a deposit for every trade you made or any position you get in. it is often required by almost brokers, normally, it is 50% of your initial margin or 50% of the value of properties. But it depends on brokers and trading instruments. If your balance lower than this value, you will receive a call to top up your balance or you can choose to close your account and pay for any lost if any. It is not good news, I guess. If you are dealing with a long position, you must make clear which is the amount you need in your balance.

Commission in CFD 

Apart from deposit you have to pay a small fee of commission. It is about 0.1% and this means that brokers earn money from spreads not from commission. Another thing is that you should think about the instest if you want to keep your position for more than one day.

In brief, in this article I show you the reason why CFD is the best trading platform. It is not a game of chance if you deal with if seriously. Now, you can begin to make your research, find a good broker, open an account and make your first trade with CFD contract. Next, learn Is low spread good for trading?