This comprehensive CFD guide will allow you to start trading online in the financial markets of your choice. You’ll find out all the details about Contracts for Difference, tools that allow you to take advantage of your price forecasts.
First of all, I recommend that you access the free, non-deposit demo here, to copy the examples and get a first-hand look at everything we talk about in the CFD guide.
Do you want to trade in shares or cryptocurrency? On stock indices or Forex? CFDs allow you to trade upwards or downwards on your preferred financial instruments.
Although ‘trading’ means ‘trading’ in general, when we talk about online trading, we now refer to the practice of trading online with CFDs.
If you are an expert and wish to try a more complex platform, a demo account with Investors will allow you to use two platforms: the basic platform (easier to use) and Metatrader.
How do CFDs work?
With Contracts for Difference, two parties agree to exchange money based on the change in the value of an underlying asset (the so-called asset).
Therefore, you do not physically trade assets, such as shares for example, but rather contract on the basis of their price.
The Contracts for Difference trader obtains a positive economic result if at the close of the position the price has moved as predicted.
The variation is calculated from the moment the trade is opened until the moment it is closed. Let’s look at this simple chart.
So, as you can see, from the moment a position is opened, the economic result will depend on changes in the stock price.
In summary: To earn with CFDs, the price must go in the expected direction and close at a higher or lower price depending on the type of position opened.
Contracts for Difference in fact, as we have seen, allow you to open bullish positions and bearish positions. To open bullish positions click on “Buy”, to open bearish positions click on “Sell”.
Opening and closing CFD positions
One of the most interesting aspects of CFDs is the ability to close a position when you wish.
You can close it after a very short time (at least a couple of minutes), if you think you have made a mistake or if you have already achieved the desired result.
Again, you may decide to close a position after a few hours, with a view to day trading, or close it after a few days.
When the position is closed by the broker
It may happen that the position is closed by the broker rather than the user. This is when it can happen:
- During closing trading hours
- If the equity does not cover the margin cover
With regard to the first point, it should be noted that the market is closed or during the Remember that you can contract with Contracts for Difference on different assets, so you weekend with regard to shares.
can also contract during the weekend on other instruments.
With regard to the second point, i.e. equity, it should be noted that CFDs are leveraged financial instruments, which we will discuss in the next paragraph and during the course.
With leverage, the broker allows you to invest using only a fraction of the capital required. However, if a position continues to lose and reaches alert levels, either you close the position or the broker will do so, subject to prior notice (margin call or margin call).
With a margin call, the broker will give the user “on the fly” notice, and the user can either increase their available account or close the position themselves.
If the user does not respond to the margin call (email, sms, other), the broker must take care and then close the position. In this way, the user will never end up in the red (as long as he uses a CFD broker’s platform that does not have any debit positions).