subject: Trade Cfd [print this page] CFD is the short form for Contract For Difference. In laymans terms is 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 doesnt need any physical delivery of the investment and that is what differentiates it from the traditional stock market trading. Traders can invest or trade CFD, hoping that the underlying market price increases. This kind of trading allows one to take advantage of margin trading. It determines the amount profit or loss. People who trade CFD are taking a big risk.
The reasons why people trade CFD are many.
This kind of trading is both fast and efficient. This means that people neednt wait for the confirmation to come from their stock broker. They neednt pay any stamp duty, only the commission, which usually small.
People who engage in this kind of trading can easily make profits irrespective of which direction the market goes. This kind trading enables them to enter and exit the market quickly, a thing that they cant do in traditional stock trading.
They 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 f 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 level of risk involved in CFD trading. The profits one gets can be high, but the loss one incurs will be equally high. Therefore it would be better if people interested in such trading to consider their investment plan taking into account their appetite for risk and their experience level. In short this kind of trading is meant for those who can handle huge losses.
by: Denyse Woods
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