CFD (Contracts for Difference) is an OTC (Over the Counter) financial product in which two parties agree to exchange the difference in the price of entry and exit of an underlying asset. CFDs are much more accessible to most traders and can offer benefits in both market growth and declining markets.
Benefits of operating with CFDs
CFDs are a very attractive element of any type of asset, including forex currency pairs, for its versatility and accessibility. Here are some of his best assets.
Suitable for more and more positions and in the fall
With CFDs you can benefit from all types of markets, both up and down. In practice, CFDs are to invest in stocks or stock indices taking advantage of the possibility of leverage. In other words, providing only funds, you can invest as if you bought more shares.
leverage
Leverage is a key element in trading with CFDs. Having the choice of leverage, you must provide that a reduced effect on the value of one percent of assets, while the total exposure has its price. Namely, profits and losses can be much more than the price paid for the contract.
Commissions and marginal applications
CFDs are the inefficiency of free products to trade the stock directly on the stock exchange and are normally exempt from brokerage commissions. AvaTrade offers trading of CFDs with no commissions and very attractive margin requirements.
24 hour market
CFD trading with you gives the opportunity to have an influence on the market 24/7. Being an OTC or OTC market bag can work with CFDs at any time of the day.
liquidity
When CFDs, for example in the foreign exchange market, will participate in the largest financial market in the world, with daily financial transactions worth $ 4,000 million, no other financial space offers greater liquidity than the currency.
But not only that, you can also operate in any other market (commodities, indices, bags), each with its liquidity and features.
volatility
The foreign exchange market is perfectly adapted to the portfolio of any investor thanks to its high volatility:
Leverage, you can get significant income from price movements
Thanks to the low prices of derivatives, entering the market to take advantage of the volatility is really accessible
Main assets available for commercial CFDs
Currency pairs (Forex)
The foreign exchange market is one of the best suited to the use of the difference contracts because of its changes of high volatility and trend.
stock
The use of CFDs on shares of major global markets provides access to thousands of investors in a market that would otherwise have a much greater capital requirement to deal with shares held.
stock indices
Another way to tap into the most volatile state of the financial markets is to open up the difference contracts at one of the world's leading stock indexes.
Raw materials
Invest in gold, crude oil, silver, metal ... most of the products also offer the opportunity to trade the difference contracts.
How do CFDs trade according to the state of the market?
CFDs offer investors the benefit of benefiting both the increasingly trendy markets and fall. For that, you must know how to act in each case:
When the indicators show that the price of an asset will increase, will open a purchase on this CFD of assets ("long" movement)
Conversely, if you think that the price of the asset will go down, he will try to sell a CFD on the same asset ("short" movement)
Then, the size of the highs and lows of asset prices will determine your outcome when you have to close the contract for difference (CFD).
Vs CFDs Futures
A typical choice of traders is to have to decide between using CFDs or futures. The truth is that although the future does not have such a big requirement to prime capital can result in much higher costs in the long run.
Low average investor size, CFDs remain the best option.
CFD Trading Platforms
AvaTrade offers a wide range of exclusive and intuitive trading platforms that make it easy to operate, manage and analyze your CFD trading operations.
MetaTrader 4: Discover the best choice for trading FX and CFD in a single window.
AvaOptions: Take advantage of our new online platform of Forex options and optimize your trading strategies.
Autotrading: Copy the trades of more experienced traders to the best automated trading platform: ZuluTrade.
MacTrading: Invest in currencies from your Mac computer with the best professional graphical and analytical tools for superior benefits.
Mobile Trading: Download our free MetaTrader 4 app and operate from anywhere via your account.
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