Trading in the stock market previously required a lot of capital, so a limited number of people were engaged in it: only those who could afford to spend serious amounts. In the XNUMXst century, trading has become a much more accessible occupation, and some financial transactions have become generally accessible. Continuing the last articles about CFD tradingI want to talk about CFD-contracts more.
CFD contracts: what are they?
First of all, of course, you need to decipher the abbreviation. The decryption looks like this: Contract for difference. This literally translates to "contract for difference." Such a rather modest and streamlined formulation hides one of the most profitable exchange trading tools behind it. The CFD scheme does not oblige the participants in the transaction to have many free trades - and at the same time, it provides an opportunity for quick earnings.
Through CFD-contract transactions carried out in the trading stocks, and their can make every trader, even one who does not have much trading capital. Thanks to these features CFD market is developing a fantastic pace, literally on a daily basis will increase the new players.
Under what conditions can CFD contracts exist? The essence of this system: the seller and the buyer enter into an agreement, which determines that in the sale-purchase relationship, the rights to the goods (or the goods themselves) are transferred to the second party. This is how direct financial instruments are traded, including stocks and bonds. If we mean derivative financial instruments (for example, derivatives), then the subject of trade is certain conditions.
Advantages of CFD trading on stocks
The main advantages of this system include:
- Leverage. A trader can make trades, in terms amounts to several times more than the actual amount in his account. Suffice it to add funds to the minimum amount, which allow brokers to become a full participant in the auction.
- Universalism. Trading CFD contracts can be used when working with a variety of financial instruments: with currency pairs and with stocks and raw materials. Work on different profiles quite profitable: in this case the trader become less dependent on the state of specific assets.
- Hedging (insurance) risks. This goal can serve the CFD, and futures and binary options. In such a case, the parties enter into an agreement, according to which the growth or decline in asset value should lead to the transfer of the difference between the original and the proposed price of the property of the seller or the buyer (depending on how the contract will be made). Sami assets thus remain in the possession of the person who originally possessed by them.
To make a deal, a trader needs to determine the difference between the current and future value of assets: be it positive or negative? The same with the stock indices. Such assets are the most popular among investors. The initial currency deposits rarely exceed 100 US dollars, while the value of one share begins with 50 2000 and can reach US $ (in this case the package includes 10-100 pieces). Minimum deposits that exhibit brokers (when dealing with stocks), are from the 5000 dollars.
What are the specifics of CFD trading?
The main distinguishing feature: working with stocks, you do not buy them! Do not become the owner of a part of the company - and, accordingly, do not bear any obligations. You can even make money on falling stock prices: all you need to do is buy CFD “sell” contracts.
Recall of leverage: the trader's potential can be significantly increased, because it is able to carry out transactions on a large amount. At the same time with the participants of such transactions are charged a very low commission fees.
To start trading contracts, you need to register with one of the reputable brokers. The process is simple: we register, we deposit funds, we go to the trading platform, we settle there and start trading. I would like to suggest in my opinion the best program: Abi.
I'll tell you about what is required of a trader in such transactions, on the platform Example Broker. It attracted me in the first place simplicity and convenience: the benefits and appreciate the beginners and experienced professionals.
CFD broker: how to work
The algorithm here is not complicated.
- We go on the trading platform, select the CFD.
- Pay attention to the left hand column, where the filters are configured: Indices, Stocks, Commodities, Forex, or All.
- Choose a direction. What do the numbers in the "Buy / Sell" column? Items that need to dial for a successful transaction. For example, 1.1170 - a deal that would be successful if the closing level will be higher 1.1170.
- Choosing a time frame. To do this, pay attention to the "Deal / order" window. A "deal" is the immediate purchase of an asset. "Order" - a pending deal (which can be made in case of certain changes in the market). Choosing the "Application", you are not obliged to personally track the necessary changes: you can set up the automatic execution of a transaction upon the occurrence of certain conditions. Thus, the program will complete the deal for you, but not without your knowledge.
- Finally, look at the graph to the right. A green indicator is a sign that the CFD is in the money. Red is out of the money.
Trading CFDs can bring no less profit than options: if you understand the mechanisms and accumulate the knowledge necessary to make transactions. Study the relevant materials, improve yourself, try, make mistakes, win - and increase your capital! And great strategies will help you with this:
- Robots of the Forex market and CFD: Binarobot-Lady.com