Saturday October 22, 2016 - 13:50:48 GMT
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Introduction to CFDs
CFD trading is a very popular financial productfor traders wanting to invest with leverage, eliminating the need to invest large amounts of money to get started.
CFD stands for Contract For Difference, and is a derivative product allowing investors to take advantage of an asset price's movements, whether they’re going up or down.
CFDs allow investors to speculate on the direction of an asset price and then take advantage of rising and falling markets. If you’re long, the profit or loss will result from the difference between the BUY price and the SELL price. In short, a long position is opened whenyou speculate the price of the asset will increase over time.
If you think the price of the asset will go down over time, then you'll open a short position. In that case, the profit or loss will result from the difference between the SELL price and the price at the end of the contract, or the BUY price.
CFDs are financial products based on margin trading and leverage. Leverage means that debt is used to increase the investment capacity of an investor. Your broker will only ask you to put forward a small part of the total value of the underlying asset, with the rest of the investment covered by the broker. This allows you to widen your exposure on a specific market or asset.It's important to remember, even though leverage can increase your profits, it can also increase your losses.
CFDs can be applied to a number of underlying assets, which can help investors diversify their risk exposure. CFDs can represent currencies, shares, indices, commodities, options, binaries, debts, bonds, ETFs and Trackers, and more.
Regardless of the financial product you’re using, trading can be a very emotional challenge as you’re investing your own money.It's important to always examine yourself, and to not get too emotional when trading on the financial markets. You must also choose the right broker with the best trading platform suited for you, such as the one offered by online trading broker, UFX.
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