CFD trading stands for Contract for Difference and is a way to speculate on the movement of an underlying asset. Using this type of trading, traders do not need to own the actual asset and thus reduce the capital required to invest in that particular aspect. In short, you are simply betting on whether that particular asset will go up or down without having any obligation to own it.
The main downside with CFDs is a high leveraged involved as you can trade with as little as 10% of the total value of what you wish to trade in. This means you only have to deposit around 10%, making it easier for newcomers who may not have enough cash lying around initially.
The key advantage of investing in CFDs
In terms of assessing whether a CFD is worth it or not, there are multiple ways for newbies to approach this. If you have no idea which direction the market will go, then look at how it has been trading over time and use that as an indicator. For instance, if the market has been steadily growing over the past few months, it would be advisable to go long on that asset which means you are betting it will continue to grow.
Another key advantage of investing in CFD is that you do not have to spend thousands of dollars on new hardware; all you need is a computer and an Internet connection. While high computing power is helpful when executing trades faster, it isn’t required so as long as you have access to one.
How to get started with CFD trading
- The first step to trading CFDs would be creating your account on a CFD broker’s website. You need to choose one that has good reviews, is regulated and trustworthy. One popular choice is Saxo Bank, as it allows traders to trade with Bitcoin; read more here.
- You don’t have to start investing right away; instead, try using free demo accounts for learning how it works before putting real money on the table. Many brokers offer virtual funds upon registration, so you won’t need to transfer anything to see how trading works. Just open an account and start practising.
- Another good practice is to follow other traders’ advice and strategies – read their blogs or listen to podcasts, for example. This will allow you to learn from the best and most experienced traders online and avoid making amateurish mistakes which can cost a lot of money in the long run.
- Surfing the web will also give you access to free courses about trading, allowing you to choose between CFDs or Forex, binary options, as well as for cryptocurrencies like Bitcoin. For those of you who wish to try out these types of investments and CFDs, there are plenty of different courses on offer for all levels of expertise. Don’t forget that some of these may not be any good so do your research on the web first before choosing a course.
- Of course, you can also ask more experienced traders on forums for advice on how to get started with CFD trading. This will likely be free of charge and will allow your network of friends to grow as well – who knows, maybe somebody has already been through the same things that you are currently struggling with.
- On the other hand, hiring an expert may be a better choice if you want quick access to information and solutions that work. Not only will they answer all your questions and help you choose the right direction, whether it’s Forex or CFDs, they will also make sure no rookie mistakes will cost you too much money in case this is your first time investing online.
Thanks to the Internet, you can find all the information you need about CFD trading online. There are plenty of resources that will help you learn how to trade efficiently and effectively, even if there aren’t any others around you who do it themselves.