What is CFD Trading?
CFD Trading – CFD stands for Contracts For Difference these are financial contracts that allow you to trade on the price fluctuations of underlying capital assets (such as indices, shares, and commodities).
A contract for difference (CFD) is a contract to exchange the difference in the value of an asset between the time the contract is formed and the time at which it is closed. You cannot own the product or instrument you choose to trade with a CFD, but you may still profit if the market moves in your favor or even if it loses if the market goes against you.
Since CFD trading is a leveraged product, you only need to deposit a little percentage of the total amount of the transaction to create a position. This is known as ‘Margin-Trading.’
Though margin trading allows you to magnify your returns, it also magnifies your losses because they are based on the whole value of the position, which means you might lose more than the money you invested.
How Does CFD Trading Work?
CFD trading does not possess the purchase or sale of the underlying investments (for example a physical share, currency pair, or commodity). You buy or sell a specific amount of units based on whether you believe prices will rise or fall.
CFDs are available on a broad number of worldwide markets, and Kanak Capital Markets CFD instruments include many options & opportunities for you to trade in.
Your profit is multiplied by the number of CFD units you bought or sold for every point the price of the instrument changes in your favor. You will lose one point for each point the price goes against you.
How to Trade CFDs?
A stock trading plan helps you to understand what caused past success and failure in order to better predict future outcomes. The three key factors that must be included are:
- Select the instrument you want to exchange.
CFDs can be traded on hundreds of instruments, including currencies, indices, commodities, stocks, and treasury.
- Decide if you like to sell or buy.
Depending on whether you predict prices to climb or decrease, go long (buy a trade) or short (sell a trade).
- Select your trade size.
The number of points the market moves in your favor or against you multiplied by the number of CFD units you have selected to trade determines your profit or loss.
- Make your trade.
Manage your risk by including any stop-loss or confirmed stop-loss orders before finalizing your deal.
- Keep track of your position.
From the position screen, you may track your CFD trade. You can exit if you want or partly shut a position at any moment.
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