• CFD: This is how trading is done with differential contracts

  • can you make money on binary options · 2017-02-23 · Melvina
  • Contract for difference - CFD for short - stands for so-called differential contracts and differential transactions. The term "difference" refers to the difference between the buying continue day and selling price of a position. There are CFDs on underlyings on equities, indices, currencies and commodities. The trading itself does not take place on the stock exchange, but takes place via CFD brokers, which also determine the CFD rates.

    How are CFDs traded?

    Closing a position occurs by buying or selling a underlying. Here, a purchase position is referred to as a long position and a sales position as a short position. In the next step, only the difference compensation look at this web-site go is then calculated, whereby the gain or the loss results from the multiplication of the purchased or sold CFDs with the difference compensation. Thus, CFDs do not have a nominal value, such as a stock.

    As a rule, CFDs are traded at very short notice. This means that a position is often closed after only a few hours, which is also called daytrading. In addition to technical analysis, Trader also uses up-to-date news or publications to your domain name they assess price movements.

    What is a margin and a lever?

    The margin is a safety margin. This is a kind of deposit and is usually one to ten percent of all positions. Traders are thus given a credit from the CFD broker in order to be able to speculate.

    In principle, it is possible to make high profits with a low effort. On the other hand, there is the high risk of loss, resulting in a leverage effect.

    Example scenario:

    Basically, the leverage can be because over here different. Even a 100-fold lever is possible. Please note that the lever is the higher, the lower the margin. This also means that profits or losses can be higher, the higher the leverage.

    What are the charges for CFD trading?

    For CFD trading, the so-called spread try what she says he is the difference between the purchase price (bid) and the selling price (ask). To buy something, the selling price must be paid. It must also be paid when something is bought.

    Example scenario:

    The spread is basically a compensation for the broker, since usually no further costs for the trade arise. Few CFD brokers require account management fees. An exception are trades that are held overnight. In most cases financing costs are due.

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    What is a stop-loss?

    Every CFD trader should have a very good strategy. This also includes inevitably the so-called stops, which can limit the loss or secure profits. The stops have to be kept, because this is a fixed rule that every trader should stick to.

    In many trading systems, the stop loss mark can be set up in such a way that the corresponding position is automatically sold as of a certain price reduction. Note that it may well be that the position is sold slightly below the limit set with the stop-loss, but this is perfectly come conversational tone fine.

    What is the risk?

    This question must be answered with a "very high". Experts advise inexperienced investors on CFD trading as these are financial products with a leverage effect. In addition, the following risks should be considered:

    CFD brokers are not regulated and are therefore not hedged by the Deposit Guarantee this post what Fund. If the CFD broker falls into the insolvency, there is a total loss.

    If a trade is particularly bad, it may well be that not only the complete use (security performance) is lost, but that money still has to be paid if the credit is not sufficient in the CFD account

    Image: Pixabay

    An article from IID.de