CFD Trading

A CFD (or Contract For Difference) is an agreement to exchange the difference in value of a certain financial tool between the time at which the contract is opened and the time at which it is closed.For example, when trading a Share CFD you trade at the cash price of the share, and pay a commission which is calculated as a percentage of the value of the transaction.  Commission rates for Australian shares is around 0.1% usually.

When you open a position however, you do not have to pay for the full value of the shares. Instead you put up a deposit, from just 5% for Australian shares. This means you can trade 15 to 20 times your initial capital.When you close your position, the difference between your opening contract value and your closing contract value is realised. So just as with buying shares or trading futures, the degree to which you are correct in your CFD trading affects how much you make or lose. Specific products like CFDs can help you make the most effective use of your investment capital, but it is important to appreciate that the amount you could lose relative to your initial investment is greater for geared products than for non-geared products.

Trading CFD’s is not restrictive to just Australian shares. Traders may use CFDs to trade on the price of a variety of products globally including shares, indices, commodities, sectors, bonds and currencies (forex)..

One thing to remember about trading CFD’S, profit or loss is determined by the difference between the price you buy at and the price you sell at multiplied by the number of CFD shares you hold, This means that CFDs give you real flexibility. Traders can speculate whether the market’s going up or down. Shorting is often used to hedge physical share positions in volatile market conditions.

Please note that trading CFDs is a geared investment strategy, carrying a high risk to your capital. Only trade with money you can afford to lose. With that said please keep in mind that virtually all brokerage houses provide excellent online training as well as paper trading to give you the insights you need to continually trade in a very successful and profitable manner.

Weather you are new or a seasoned trader you can receive a wealth of knowledge and training online at www.cfdtrading.com.au Anytime there is any risk involved it is highly recommended you get a proper foundation of education before launching out to make your fortune.

Good luck and good trading !