subject: Trade Cfds [print this page] CFD is the short form for Contract For Difference. To put it laymans terms it is basically an agreement between two persons. In this agreement the closing and opening price are exchanged after they have been multiplied by the agreements underlying volume. This form of trading is different from traditional stock trading as there is no physical delivery of the investment. and that is what differentiates it from the traditional stock market trading. Traders can invest or trade CFDs, hoping that the underlying market price increases. This kind of trading enables the trader to take advantage of margin trading. This margin trading determines the amount profit or loss.
The reasons why people trade CFDs are many.
CFDs trading is both fast and efficient, meaning that people neednt wait for the confirmation to come from their stock broker. Instead of paying any stamp duty they have to pay only the commission which usually small.
People who trade CFDs can easily make huge profits irrespective of which direction the market goes. The fact that they can enter and exit the market quickly is what makes this kind of trading popular. One cant do the same in traditional stock market trading.
Traders can issue stop and limit orders to stay in control. These people have the option of investing a small amount of money. They can then adjust their leverage of these investments. This leverage determines the amount of profit or loss the traders gets.
This kind do of trading provides numerous options. Traders can choose from index-tracking, commodities, and single stock CFD. They can trade in almost any part of the world.
Traders however must be aware of the fact that CFD trading involves a lot risk. The profits one gets can be high, so will be the loss. Therefore people who are interested in such trading should consider their investment plan taking into account their appetite for risk and their experience level. In short only those who know about the market well should engage in this kind of trading.
by: Sherryl Woods
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