What is CFD trading?

What Is CFD Trading?

What Is CFD Trading?

For a while now, CFD trading has been growing in popularity in the world of online trading. That’s why we decided to write this article – to help our readers adjust and make the most of this new trading system. Many binary options brokers have begun adding this type of trading to their offer, so don’t be surprised if you see it on the website of your trading partner, too. But what is CFD trading? What makes it different from regular binary options? Well, that’s what we’re going to show you here. We are starting with the most fundamental facts, so if you want to get started from the beginning all you have to do is read on.

What is CFD trading? | What makes it special?

This type of trading is actually nothing new, it’s been around for a while, but its popularity started to grow only recently. CFD actually stands for Contract for Difference, and one of the main differences between this type of trading and binary options is that there are no fixed payouts or expiry time. You do have to guess the way an asset’s price will move, but your profit (or loss) is determined by how much the price moves. Therefore, if you’re, for example, not satisfied with how the price is moving, you can always wait a bit more if you’re sure it will change direction. Of course, the problem is that it can continue to drop, too. But the answer to the question “What is CFD trading?” has another important component. Stay with us to find out what it is.

What is CFD trading? | Low margin

The key to CFD trading is its low margin, which is usually somewhere around 5% in this business. This allows you to buy shares at extremely low prices and helps people who are not big investors to get in on the action. For example, if a stock is valued at 100$ and you want to buy 100 of them, and let’s say that the margin is 2%, you will only need 200$ to be able to invest (100x100x0.02). Once you enter the trade, you monitor the price and decide when you want to sell, depending on your goals and the situation on the market. Like we said, the more your asset moves, the bigger your profit (or loss), so invest carefully.

What is CFD trading? | Conclusion

So, what is CFD trading? Well, it is a type of trading with no fixed expiry time or payouts that allows you to enter trades with a much lower investment than usual. This is what makes it so attractive to so many people. However, just like in binary options trading, a strategy is needed if you want to be profitable. We will, therefore, bring you more educational articles about this topic in the upcoming weeks, so that you can dive right in and grab all the advantages of this interesting type of trading. But our other articles here may still be able to help you, so make sure you take a look and see what we offer.  


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Author: Ben Prescott

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