A Contracts for Difference (CFD) is an agreement between two parties to exchange the difference between the opening price and closing price of a contract.To get more news about veracity markets, you can visit wikifx.com official website.
CFDs are derivatives products that allow you to trade on live market price movements without actually owning the underlying instrument on which your contract is based.
You can use CFDs to speculate on the future movement of market prices regardless of whether the underlying markets are rising or falling. You can go short (sell), allowing you to profit from falling prices, or hedge your portfolio to offset any potential loss in value of your physical investments.
Similar to trading Forex, CFDs allow investors to hold both "long" and "short" positions granting the retail trader with the opportunity to profit in either a rising or falling stock market. Additionally, investors have the convenience of limiting losses or claiming gains by using stop losses and limit orders.
Because CFDs are traded on margin rather than paying the full value of a transaction, the investor only needs to pay a percentage when placing a trade. Trading with margin grants the investor with leverage, which in turn allows the investor to access a larger amount of shares than buying or selling actual stock shares. By offering CFDs, we are allowing our investors to speculate on instruments and markets that may otherwise be unavailable or difficult for them to trade.
How does the CFDs market operates?
As with traditional share dealing, CFD prices are quoted as a Bid (the price at which you can sell) and Offer (the price at which you can buy). CFDs are traded on margin (also known as leverage), which means that to open a position you need to deposit a small fraction of the full value of your trade, known as initial margin. The initial margin required varies across different markets though would typically be between 10%-25% for an equity CFD trade and between 2%-5% for an index or currency trade.
What is margin and leverage?
CFDs are leveraged products, which means that you only need to deposit a small percentage of the full value of the trade in order to open a position. This is called "trading on margin" (or margin requirement). While trading on margin allows you to magnify your returns, your losses will also be magnified as they are based on the full value of the position, meaning you could lose more than any capital deposited. As CFDs is a margined product, there are overnight financing charge when you hold your CFD position open.
Leverage your investment potential
One of the main advantages of CFD trading, as compared with conventional types of trading, is that you can gain the same amount of market exposure by depositing just a small fraction of the total value of your trade.
| By | buzai232 |
| Added | Apr 25 '22, 10:03PM |
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