Introduced to the market during the 1990s, CFD trading is an increasingly popular derivative within the retail sector. It is very similar in principle to spread betting but is more accessible globally, mainly due to the stigma attached to the word betting in some countries.
What is a CFD?
– CFDs History: In the Beginning
– CFDs Trading Guide
– CFD Uses
– CFD Demo Accounts
– Short Selling
– Initial Margin
– Variation Margin
– CFD Valuation
– Margin Call
Advantages Of Trading CFDs
– Corporate Actions
– Simplicity and Lower Transaction Costs
– CFD Trading Vs Share Trading
– CFDs versus Futures
– CFD Trading Vs Margin Lending
– Differences Between CFDs and Financial Spread Betting
– Swing Trading
– Short Term CFD Trading
– Intraday Trading with CFDs
– CFD Day Trading
– Pairs Trading
– Trading Volatile Markets
– Using Charts to Trade CFDs
– Placing a CFD Trade with a Stop Order
– Shares Trading
– Index CFDs
– Foreign Exchange CFDs
– Commodity CFDs
Characteristics of CFDs
– Direct Market Access
– Market Maker CFD Model
– CFD Models – DMA vs Market Maker
– Costs of Trading CFDs
Managing your Money: Risk and Money Management
– Dangers and Disadvantages of Leverage
– Win/Loss Ratio in CFD Trading
– Determing Exit Points
– Stop Loss and Limit Order
– Position Sizing: Fixed Percentage Model
– Position Sizing: Fixed Dollar Model
– Drawdown Recovery
– Trading Psychology – Controlling Emotions
– What To Do When Things Go Wrong…
Survival Strategies: Avoiding the Traps
– Know your Goals
– The Workings of Leverage and Margin Trading
– Always have a Stop Loss
– Position Sizing
– Starting Out
– Trade with Money You can Afford to Lose
– Financing Costs
– Direct Market Access or Market Maker CFDs?
– Data Accuracy
– Know the Markets you are Trading
– Develop your Trading Method/System
– Keep Accurate Records
– Make your Position Size Relevant
– Trading Psychology
– 10 Golden Rules of CFD Trading
– How To Choose A CFD Provider?
– Which CFD Broker to Trade With?
Top 2 CFD Brokers
Unique Advantages – Spread Betting or CFDs on MT4 or Sleek Web Platform!
Formerly Core Spreads, Trade Nation has been trading since 2019. Trade Nation is licensed under the Financial Conduct Authority in the UK, the Australian Securities and Investments Commission (ASIC), the Financial Sector Conduct Authority (FSCA) in South Africa, and the Securities Commission of The Bahamas (SCB). This broker aims to provide very competitive, fixed spreads on a range of markets.
- Deep Interbank Liquidity with very tight spreads!.
- Tight, fixed spreads.
- EAs and Hedging is allowed.
Disclaimer: Spread Betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81.7% of retail investor accounts lose money when trading Spread Bets or CFDs with this provider. You should consider whether you understand how Spread Betting and CFDs work and whether you can afford to take the high risk of losing your money.
Unique Advantages – Variable Margin (Control Your Leverage)
Bux Markets is a fast growing spread betting and CFD provider. We love the fact that Bux Markets only charge interest on the ‘borrowed’ amount (unlike other providers who charge you on the full amount including the amount you put up as margin) and that they pass on 100% of the announced dividends net of withholding tax (unlike other providers who may pay just 80% of dividends). With Bux Markets you can trade on thousands of different markets including shares, indices and commodities.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.9% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
What are Contracts For Differences?
A Contract For Difference is simply an agreement between two parties where one pays the other the difference between the current price of an asset and its price at a specified time in the future. One of the similarities with spread betting is that although there is an expiry date of the contract, it can be closed by early by either party – the private trader or CFD broker. A broker will normally only close a contract if the trader has exceeded its minimum margin requirement and doesn’t have the funds to cover the trade.
The benefits of CFDs over more traditional methods of investing are numerous. We will discuss each of these in turn:
Minimal margin requirements
CFD brokers, like spread betting companies, offer their clients the ability to trade using leverage. When they open contracts, the trader is only required to fund a small percentage of the contract’s value in the form of a deposit. Being able to trade on margin means the trader can open positions that are worth considerably more than their account balance meaning resulting in larger gains.
Although it is a highly beneficial aspect of the CFD, trading with leverage is particularly risky and should be headed with caution. This is why we would advise anyone starting out in CFDs to begin by opening a demo account first to familiarise themselves with how it effects trades and also the risk management tools that can be used to offset this risk. Most of the leading brokers will offer a practice account and they are free to open.
The number of different tradable markets within a CFD account is simply breath-taking. Most brokers will provide access to the following and more:
- Individual stocks and shares
- Interest rates
- Market sectors
Trade on rising or falling markets
When you use share dealing services or brokers to buy other assets, you can only benefit from price rising. This doesn’t help you during bear raids. With Contracts For Difference you can both ‘buy’ and ‘sell’ meaning if you think an asset price is going to fall, you can go short and gain from that fall if it were to happen.
If you are trading from within the UK you will also benefit from foregoing stamp duty on any trades. This is handy if you regularly invest into company’s stock as it will cave you 0.5% of the total trade’s value. You will be liable for other forms of tax though so if you are based in the UK then you might want to consider spread betting as an alternative.
Although it can be beneficial to trade CFDs or even use them as an investment vehicle, they are harder for the novice investor to pick up and get into. There are a number of differences to the more traditional methods of investment although if used carefully, they are extremely beneficial.
If you are considering trading CFDs but have never dealt with derivatives before it would be in your best interests to open a practice account to learn the how they work before risking real money.
From our end we have scoured the market for the leading and most competitive contracts for difference (CFD) accounts available. Selecting the right CFD provider from our specially chosen partners will help you buy, manage and negotiate your CFDs to make the most of your investments. We have done this by allowing you to clearly view and easily compare the various CFD account rates of our different providers. All of our partners are authorised and regulated by the Financial Conduct Authority (FCA).