What is CFD trading and how does it work?
A CFD or Contract for Difference is a financial instrument that allows you to benefit from the price movement of an asset without owning the asset.
When trading CFDs, there is no purchase of the asset itself: Trading is based only on price differences – the basis of the transaction is speculative profit, and it is very similar to Forex. CFD assets can not only be currency pairs, but also stocks, indices and commodities for example. Contracts for difference are derivatives on underlying assets that generate similar profits but do not confer ownership rights to the asset itself. Their object is exclusively in the movement of the price.
It is very important to pay special attention to the choice of your broker for trading. Please note the main criteria by which you can evaluate the broker:
Regulation. It is worth checking the existence of known control organizations that may affect the broker. For example FCA, BAFiN, CySEC.
Tools. A trader might need certain technical or economical analysis tools to make the right trading decisions quickly. Many brokers offer certain tools free of charge.
Obligation to make additional contributions. If there is a big unexpected price jump against you, your account balance can be negative. In this case, either the broker will balance the difference to zero, or you will have to refill the account yourself to balance it.
Trading conditions. No less important are the amount of the minimum deposit, the lot volume, the leverage you can use and work with, and the payout methods.
Execution time. It is important that the broker has his servers in well-known data centers near the stock exchanges, e.g. in New York or London. This ensures fast trade execution and real-time data.
If you are new to trading, you can open a Demo Account on our website.
