CFD Trading and Brokers

CFD brokers list - a list of the reputable and regulated Contracts For Difference brokers and platforms

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How To Get Started In CFD Trading

If you’re really serious about finally starting CFD trading then this post will help you to grasp the basics.

So you've decided that you want to try CFD trading but you're not quite sure how to go about getting started. Do not worry: this article will help you out!

Open a practice account - Test out your strategy before you decide to "go live" (use real money) with it. If you lose all your money on a practice account, who cares? It's not real money. You can still eat.

Decide how much money you can safely afford to lose - CFD trading, like any other kind of trading/investing carries with it the risk of loss. You should never invest more than you can afford to lose. This means if you only have $1,000 to your name, don't put $1,000 in your CFD account because what if you lose it all?

Decide how much you would be comfortable with losing that wouldn't affect your life or your family's life in a worst case scenario if you lost it all. $100? $1,000? $5,000? The amount doesn't matter and will be different for everyone, but operate under the assumption that you lose everything just in case.

Trade very low volume at first - I know, you're anxious to jump in and start making big money. But remember, if your trades lose money (and they probably will, especially when you first start), by trading smaller lot sizes you will lose less money. For example, say you opened an account with $500. If you had 5 losses in a row, wouldn't you rather they be $10 losses each than $100 losses each?

You can always scale up in the future - Wait until you have data that your strategy is profitable over the long term before you start trading a lot of money. Slowly increase you position size over time. If you have a good winning record, slowly increase the size over time. Don't rush it. If you rush it you will likely lose money by overlooking some small detail.

Don't take advice from just anyone - Just about everyone online in the trading community claims to have a winning strategy (often for sale). Don't believe them without being shown absolute proof in the form of audited account statements (99% of scammers will not be able to provide these). Everyone wants to sell you something. Always be cautious!

These are the overlooked steps. Many people just want to jump into it and think they'll be making thousands of dollars per day, and most of those people are no longer "in business" after a month or so because they failed to follow these steps and blew out their accounts.

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Dinner with candles

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Different Functions of CFD Companies

When you are in the CFD market, you need to engage with the right CFD brokers or companies in order to be successful in the chosen field.

CFD trading company has a very crucial function to play in the CFD business. Aside from dealing with the traditional brokers, you need to find the best company to trade CFDs that can offer you the best solutions you needed in order to achieve your goals in the market.

Because of the booming online CFD trading, there are many trading institutions you can find online. They are offering different product and services. However, their main function is to provide the necessary things you need in the CFD market. Basically, these institutions will help you as your join the market. They are offering various kinds of CFD accounts to address the different needs of traders. These accounts may vary according to the financial investment and budget of the customer. As you open your account from any trading institutions, you will be given a trading instrument and system that will help you earn and increase your investment in the future.

There are two basic things that you need to consider in choosing the right company. You have to look at very closely on the company's deposit and withdrawal method. The withdrawal and deposit transactions should be done conveniently on your part, with the help of the company's trading system and process. It is important that the company can comply with the requirements of your credit card. With an account, the transfer can be immediately. Avoid those companies that do not cooperate with major credit card company and offering other mode of transactions. Another thing to consider is the availability of expert advisor in the trading establishment. Expert advisors are very necessary since they will be guiding you in any decisions you have to make.

There are many trading establishments you can find online. Thus, comparison between CFD companies should be done. When you choose the best company, you need to compare the rates, the products, and services they offer as well as the terms and conditions. It is a wise move to choose an affordable service yet, having the best and right CFD system and services. For beginners, you need to make serious research on how the different CFD companies vary from each other. Joining the CFD market is not easy. You need to be aware on how everything works especially the buying and selling process.

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CFD Trading Tips

Knowing how much to invest and when to place a trade are the two most important factors to successful CFD trading. But those aren’t exactly secrets. What remains a mystery to most, however, is how to prepare for an investment before it occurs. Whether we call it a trading style or strategy, a plan of action is required to achieve our objectives. The alternative is to simply throw caution to the wind and trade on instinct, which is typically a recipe for disaster. With that in mind, let us review a few simple tips that can help you get started in CFD trading.

Start slow

Easily the most common mistake the average newcomer makes is to start trading large amounts straight away. As with any new endeavour, you are bound to make a series of missteps at the outset. But because leverage exponentially enlarges potential losses, a rookie error could be catastrophic. It is no surprise then that novice CFD traders have a short shelf life, since many of them throw in the towel before they learn the basics of the business. So in this instance, it is prudent to start slow and learn the ropes before you make a major move.

Avoid trading on instinct

Many rookie traders talk about getting ‘feelings’ and ‘hunches’ about the price movements of financial instruments. And rather than do the research that might require them to crunch numbers or at least look at charts to examine trends, they trade on gut feelings and other inconsistent, ambiguous explanations. Seasoned traders almost never do that. Because they are in the business of minimising risk, they make sure they know what they are getting themselves into before they take a position.

Determine entry and exit points

Almost all successful traders have one thing in common: they are incredibly well disciplined. In addition to rarely trading on impulse, they also select the price levels they want to trade at in advance. When practiced consistently, this helps them calculate exactly how much they want to make, or would be comfortable losing on a trade. To do this, they must first determine two exit points — one where the trade goes their way and one where it moves against them. Since disciplined traders simply wait until the underlying asset reaches an attractive price level, the entry point is typically much easier to arrive at than the exit point.

Use stop losses

Another common error new traders make is that they fail to make proper use of stop loses. Not only do they not employ them enough, they also have a bad habit of moving them further away when a trade goes against them, which nearly the same as not having a stop loss in place at all! It is for this reason that we strongly recommend that you use stop loses as they were intended, i.e., to protect your capital by automatically selling at predetermined exit levels.

Know when to cut your losses

Inexperienced traders often get emotional about their investments. Instead of simply closing a position and living to fight another day, they often double down when a trade isn’t going their way, which brings down their average entry price, but increases their exposure at the same time. Once again, these mistakes are almost always the result of poor discipline. An expert trader, by comparison, knows when to call it day. Rather than stubbornly holding out hope that things will turn around, he will limit his potential losses by closing his position at the predetermined exit point.

Let your profits run

When traders are no longer newcomers and they have learned to limit loses, the question of profits takes centre stage. In particular, most struggle with the decision of how long to let their profits run before closing a position. While it is important to set and stick to exit points on the upside as well, taking profits too soon makes it harder for traders to beat the market. It is up to each individual investor to determine which trades are worth holding onto a bit longer than they normally would have.

Diversify

Just as it does with your investment portfolio, diversification helps you lower the risk of CFD trading by spreading your capital across different markets, sectors, and investment vehicles. Since there is no shortage of investment opportunities when it comes to contracts for difference, there is absolutely no reason to expose yourself to unsystematic risk.

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Devising a strategy is a central component of successful, sustainable investment - anything else is either highly labour and time intensive, or bordering on guesswork.

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Leverage can be a double-edged sword, and has the effect of amplifying trading positions across the board to maximise earnings and, unfortunately, losses.

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Difficult times for the stock markets

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CFD Markets – Types of CFDs

Now that we know why contracts for difference are so popular, it is time to talk about how they are used in everyday trading and the different CFD markets available. Because of the wide range of choices they offer in global markets and asset classes, some investors consider CFDs invaluable tools that can be used to both build wealth and protect it.

What markets are CFDs traded in?

Because all CFDs are between the client and his broker, the number of choices/CFD Markets open to you depends on the access your CFD broker has to the world’s major markets. While it is true that most brokers offer products in most financial markets, access to specific asset classes and fees may vary based on the provider and his location. With that said, here is a list of the main CFD market types that most brokers can trade from their platforms:

CFD Markets

Global CFDs on shares from the UK, USA, Asia, Europe, etc

Stock index CFDs for the Dow, NASDAQ, NIKKEI, FTSE, DAX, etc.

Forex CFDs for all of the world’s major currencies, including the USD, GBP, EURO, etc

Industry sector CFDs, e.g., banks, technology, oil and gas, etc.

Commodity CFDs like gold, silver, oil, wheat, corn, etc.

Share CFDs

The primary advantage of buying contracts for difference on this CFD Market instead of regular shares is that you profit from the daily movements of the underlying asset without having to pay the full value for it. As we mentioned in the previous entry, leverage lets you go long or short with a small margin deposit to cover any potential downside on the contract. And because some of these contracts do not have an expiry, unlike futures contracts, the investor may have the option of closing his position whenever he wishes, for either a profit or a loss.

Stock Index CFDs

Considered a much safer, less volatile investment strategy than buying individual shares, buying index funds lets investors profit when a certain groups of shares does well. An attractive option for inexperienced investors, trading indices with CFDs is a simple, straightforward way to speculate on the performance of specific market segments. If, for example, you believe that the FTSE 100 Index will fall in the coming weeks, taking a short position in FTSE index CFDs could return a healthy profit for a small investment.

Currency/Forex CFDs

Although CFD and forex trading have many similarities, including the trading platform and trade execution process, they are not identical. The main difference between forex and CFD is that when you trading currencies in the foreign exchange market, you are betting that one currency will rise or fall against the other. For example, you might go long in USD/EUR future contracts because you believe the value of the U.S. dollar will rise against the value of the euro over a certain, specified timeframe. But when you trade CFD currency contracts, you are simply speculating that one currency type, such as the USD, will rise or fall in the future. In other words, there are fewer unknowns, or variables, when you trade currencies with CFDs than with forex.

Sector CFDs

Much like trading index CFDs, buying sector contracts gives you exposure to a particular group or basket of shares in a certain financial market. If, for example, an investor believes that the banks in the UK will come under pressure in the near future, he could go short in UK bank sector CFDs, which would allow him to profit from falling prices. Contracts can also be used to hedge the equity portion of your portfolio against a market selloff in a specific sector. Using our previous example, you could go short in UK bank sector CFDs if you had a large number of bank shares in your portfolio.

Commodity CFDs

Whether you are interested in gold or silver, oil or grains, CFDs give traders the ability to profit from indirect investments without the possibility of physical delivery. An increasingly popular alternative to commodities futures trading, contracts for difference offer several obvious advantages. Depending on the broker, CFDs generally have lower margin requirements than futures contracts. There are also no commission fees on contracts for difference, since the broker profits from the difference between bid and ask prices — a.k.a. the spread.

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CFDs are actually vastly different to futures contracts, and their contrasting characteristics should be factored in when considering which instrument is best for a particular trade.