What Are CFDs?
CFD is an abbreviation of Contract For Difference and a generic term that is used in the context of trade and speculation of so-called “underlying assets”.
Underlying assets can in theory be just about anything but the most common are:
Commodities, such as gold, oil, silver, corn, natural gas and crude oil
Stock indices-such as Dow Jones, Nasdaq, OMXS30 etc
Individual stocks-such as Google, Facebook, Apple, Volvo, Ericsson, etc
Cfd’s-The Underlying Principle
CFD’s PrincipDen principle behind with CFD’s are:
CFD is a contract (a so-called financial derivatainstrument) that allows the merchant can make a profit (or loss) at the price movement of the underlying asset.
The retailer owns not software but instead a contract with a broker. This contract is based on the difference between the value of the goods at the time of the affair until the merchant elects to terminate the deal.
CFD Trading with CFD based on how you think an underlying asset will be developed in the future. If you believe that an underlying asset such as gold prices, will rise to place a purchase order. Do you think instead that the price of gold will drop, place a sell order.
It can be said that by placing a buy order, actually buy the opportunity to buy at a certain price. So if the price of gold goes up, so do you have earned money because the price when you added your buy orders were lower.
This is the basic idea of CFD and this very fundamental idea is, in theory, very straight and simple. The hard part is, of course, in anticipation of the price of the underlying product you choose to trade will rise or fall.
CFD Trading And Leverage
The main reason for CFD trading has grown in popularity is the ability to make money on small price movements. Thanks to something called leverage. The broker you have chosen will offer you a leverage which means that you only need to cover part of the total amount, your broker will cover the rest.
Exactly which lever you are offered will depend on the underlying be you choose to speculate but also on which broker you choose. You will find the best agents for CFD trading below.
Best CFD Trading
Best Swedish CFD Broker
AvaTrade CFD HandelAvaTrade is a popular choice for trade with CFDs. Why is their formidable customer care and educational programs for CFD and forex trading. If you want to trade commodities, energy products or stocks and indexes, so AvaTrade is a really good choice.
They offer free demo account in which you can get to know the software and also learn more about CFD trading. Would you then create a real account so you are offered a signup bonus on your first deposit. AvaTrades CFD site is in Swedish. Please note that certain lessons and utblidningsmaterial, however, are only available in English.
Markets.com CFDsMarkets.com is another popular option. Markets.com may be seen as ones that are here to stay. Their customer service is good just as opportunities to learn more about CFD trading. Their CFD site can be found at Swedish and also it offers you free demo account in which you can try you out without risk.
etoro Trading With CFDSeToro is a CFD broker that is old in gamete. etoro has been and is still a popular choice for all types of trade, including CFD’s of eToro offers you a free demo account and a CFD-site entirely in Swedish.
Risks Of CFD Trading
The most obvious drawback is of course that it is not only the profit doubled thanks to the lever. While the loss is affected in the same way by leverage. Always keep that in mind.
CFD trading is incredibly exciting and the possibilities are great. But it is also very difficult to keep a cool head when the major price movements takes off. Therefore always follow our two most basic advice for trade with CFDs and forex:
Always have a predetermined plan for different share movements
Speculate never with money you can’t afford to lose
Do you follow these two, very clear and simple advice, you have a good chance to become a successful CFD trader.