What Are CFDs?
A CFD (Contract for Difference) is a form of financial investment made on the future movements of financial assets' live market prices. This trading method enables you to create an agreement (contract) for the purpose of exchanging the difference in the value of an underlying asset (stock, commodity or index).
The basic principal is very simple: pick an asset and decide to go long (BUY), if you predict the market price will rise or go short (SELL) if you predict the market price will drop. You can make profit if the market moves in your favour, whether it's an up trend or a down trend movement.
The BUY price (ask) is always slightly higher than the SELL price (bid) and the real market price of the asset is somewhere in the middle. The gap between the BUY and SELL prices is called "spread".
CFDs are a leveraged product (up to x200 leverage with the tradovest platform). This means that you can trade with only a small percentage of the full value of your trade and still be able to magnify your returns no commissions, no hidden fees involved.
The price of gold is rising, but you think it will soon drop.
You open a SELL position on gold (6 ounces) at $1,050 an ounce (the bid price).
6 x $1,050 = $6,300
The contract is leveraged on a 1:50 ratio:
$6,300 : 50 = $126
This means you need at least $126 in your trading account (initial margin) in order to open this position.
Gold then drops $10 in value. You manually close the position and earn:
$10 x 6 (ounces) = $60
Your profit is $60
At no point did you actually buy any gold. You simply invested on the commodity's market performance.
Advantages Of CFD Trading
CFD trading enables you to open multiple trades with a relatively small capital and without paying fees to a third party. Unlike traditional trading, there is no need to actually purchase an asset. This means no paperwork and no contractual arrangements with brokerage firms or banks.You can simply register with your info, deposit funds in a segregated trading account and start investing independently.
Leverage offers you the ability to open a position with only a fraction of its actual value. Doing so, you can amplify your profits simply because they are based on the full investment amount of the position.
As a CFD trader, you gain access to all 3 major markets – stocks, commodities and indices. Trading on a wide range of markets and assets allows you to build a well-balanced and solid portfolio.
When trading CFDs you have the ability to generate profits, regardless of the direction of an asset's market price. You can open a SELL position and earn as the asset drops in price.
You can automatically control your exposure by setting the stop loss/take profit parameters. This feature will automatically close any open position in case the price either drops or rises beyond a predetermined point.
- Simple, flexible and convenient
- Begin with a small initial investment
- Leveraged trading
- Risk management tools
- Available 24/5
- Transparent and secure
Why Trade CFDs With Tradovest?
When you open an account with tradovest, you get the all-inclusive trading experience.
We're committed to providing you with more than just cutting-edge market technology. Enjoy unlimited access to our massive collection of video courses, educational eBooks and live webinars, daily financial updates and dedicated account management conducted by one of our top market experts and 24/7 support.
The benefits of Tradovest:
- Award-winning platform
- All-inclusive education center
- Access to over 1,000 top assets
- 1-on-1 sessions with experts
- No commissions, no hidden fees
- Secure and regulated broker
- Tight spreads
- 24/7 professional support
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