What is CFD Trading? – Basic tutorial

CFD definition and explanation: 

CFD means in English “contract for difference”. It is an over-the-counter derivative that can be traded on a wide range of assets. In contrast to the classical direct stock exchange trade, CFD trading has several advantages and offers the investor the possibility to conclude an investment with small as well as large capital. You can trade long or short on different markets with leverage.

Advantages of CFD Trading: 

  • CFDs are suitable for any amount of money
  • Trading on rising and falling markets (long and short)
  • Trading with leverage
  • Low trading fees
  • High liquidity of CFD markets
  • Use professional trading platforms

CFD Basics: Facts of the derivate

Are you looking for valuable information on the subject of “CFDs”? – Then you are exactly right on this page. With more than 7 years of experience in the financial markets, we will explain the exciting topic of contracts for difference. On this page, you will find the basics and valuable tips.

Contracts for difference are over-the-counter contracts that can only be purchased from an online broker. When you trade with brokers, you conclude a transaction for a contract. The contract is based on an underlying asset (stock, currency, commodity, etc.) and imitates its price 1:1. As an investor, you do not own the direct underlying asset, but only the contract or claim against the online broker.

CFD trading always occurs between the two parties “Broker” and “Trader”. In the following sections, we will explain to you step by step how trading with contracts for difference works and what risks and opportunities there are.

Note:

CFD Trading is risky. You can lose your invested money.

Advantages and disadvantages of CFD Trading

The biggest advantage of CFDs is that traders/investors can invest in any asset with a small amount of capital. Traders get very fast and easy access to the markets through an online broker. What was very difficult a few years ago has now become very easy thanks to the Internet.

In the following table I have summarized all advantages and disadvantages for you:

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