Update CFD Trading : A Beginners Guide
September 01, 2018
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A CFD, or Contract for Difference, is an agreement between two parties to exchange the difference between the opening price and closing price of a contract.
You can use CFDs to trade and speculate on the price movements of thousands of financial markets regardless of whether prices are rising or falling. You can go long (buy) a CFD market, and profit from prices as they rise or go short (sell) and profit from falling prices. CFDs give you a great deal of trading flexibility, allowing you to profit from financial markets regardless of price direction.
How is trading CFDs different to investing in shares?
Unlike investing in shares, when you trade CFDs, you are not buying or trading the underlying asset. What you are buying is a contract between yourself and the CFD provider.
Because all you own is a contract with the CFD provider, you are also taking a bet that the CFD provider is in a sound financial position and will be able to meet their obligations to you. For more on this risk, known as ‘counterparty risk’.
Also, while the value of the CFD is derived from the value of the underlying asset, it may not track it exactly. These small differences can significantly affect any gains or losses you make.
Is it for you?
CFDs are not a simple product. Trading CFDs is complex for several reasons:
- CFDs might seem similar to mainstream investments such as shares, but they are very different.
- CFDs are not standardised and every CFD provider has their own terms and conditions.
- It is very hard to assess the counterparty risks involved in trading with any CFD provider.
- Leverage means small market movements can have a big impact on the success of your trades.
- CFDs are dependent on conditions in the market for the underlying asset, even though you are not actually trading the underlyingasset.
As well as understanding how CFDs work, you also need a good understanding of the risks of trading CFDs. For more about these risks, Click here for more details.
I have some money, shall I start trading?
To become a successful trader; before start CFD trading (or any share trading) you MUST have some QUALITIES.
- Patience : to wait for good opportunity to trade.
- Calmness : do not get excited when profit goes very high and loss goes very low.
- Courage : to risk your capital and close trading when it goes beyond expectations.
- Angry-less : you are not supposed to react with angry while you trade
- Analytical : must have good analysis criteria to win in this field.
- Research : you must be a good researcher in order to sustain in trading. Find out relevant news, ignore irrelevant information etc.
- Luck : this is the most important thing you ever need in trading. News, Analysis tools, Expert opinions will never ALWAYS be true.
If you think you don't have enough score in the above qualities, well, wait for that by doing DEMO trading. We will discuss demo trading later.
Which CFD broker I can trust?
Very good question. When it matters money, its sure there are cheaters. If you allow your money to invest in wrong hands you must have a tragic end. So be very careful while selecting brokers.
In my experience Plus500 is a trustworthy broker in CFD trading.
Why Plus500?
No Spam Calls :
This is one of the great advantage in Plus500. When you have to give your mobile number to financial enterprises, you will think twice of spam calls. Plus500 will not call you for promotions or they don't insist you to put more money.
Customer Care Support 24/7 & Live Chat :
Good customer care support is a highlight of Plus500. Their response is fast regardless of how much you invested.
Various Platform :
At Plus500 you can trade in variety of platform. Web platform, Application for PC, Androind, iphone etc.
High Rated CFD Provider :
Plus500 is one of the highest rated CFD trading apps on Apple's AppStore and Google Play as it is simple to use yet powerful in its many advanced features. It also includes CFDs on popular financial instruments. Leverage upto 1:294.
Deposit Options:
You can deposit your money using Credit card, Debit card and Bank wire transfer.
Bonus:
Plus500 will give you initial bonus and according to your trading, they will provide additional bonuses too.
Unlimited Demo Account :
As stated above, if you think your Quality Score should increase, start demo account is a good choice. When you're ready, you can start Real Account. Demo account is very helpful in understanding the trading platform.
Tips for trading
- As a beginner, do not invest huge money in trading. Always remember you can lose all your capital in CFD trading.
- To begin, trade contracts for low quantities.
- A good trader will not trade on daily, weekly or monthly basis. He will trade at the right opportunity.
- A good trader will give more emphasis on protect investment rather than make profit.
- For each Buy/ Long or Sell/Short positions you trade, there must be enough justification.
- Never trade on the basis of graph movements.
- Always set Close at Loss value or Trailing stop to prevent huge loss.
- No News, No Analysis tools, No Experts can ALWAYS predict markets.
GOOD LUCK