CFD Trading Tutorial for Beginners
Would you like to learn more about CFD trading? If you do, this CFD trading tutorial is for you.
It is the method of speculating on the underlying price of an asset – like cryptocurrencies, forex, shares, and more – on a trading platform.
We need to note that a CFD is an abbreviation for ‘contract for difference.’ A CFD is a type of derivative that enables traders to trade the price movements of the above-mentioned financial markets.
In the case of CFD trading, you don’t own the underlying asset – you are only getting exposure to its price movements.
Any CFD trading tutorial would be incomplete without mentioning interesting details. Let’s focus on trading essentials.
It is possible to go long or short with CFDs. Importantly, when trading CFDs, you are forecasting whether an asset’s price will go up or down. For instance, if you think the asset’s price will rise, you will ‘buy’ (go long).
However, if you think the price will decrease, you will ‘sell’ (go short). You need to remember that the outcome of your prediction will decide whether you make a profit or incur a loss.
It is desirable to remember that both ‘buying’ as well as ‘selling’ can result in a loss. So, you need to be careful when it comes to CFDs.
CFDs and regulations
Did you know that CFDs aren’t allowed in the United States? However, the situation is more complicated than it may appear at first glance.
The U.S. Securities and Exchange Commission’s (SEC) position regarding CFDs is quite interesting. It has restricted the trading of CFDs in the country. However, nonresidents aren’t barred from using them.
CFDs are allowed in many countries. Interestingly, CFDs are allowed in listed, over-the-counter markets in many major trading countries. For example, they are allowed in the United Kingdom, Switzerland, Germany, Spain, France, South Africa, New Zealand, Norway, Sweden, Italy, Singapore, Thailand, Denmark, Belgium, and the Netherlands. Besides, CFDs are allowed in Hong Kong.
CFD trading tutorial would be incomplete without mentioning useful tips.
There is no lack of warnings about the risks of trading with CFDs. Hopefully, the situation isn’t as complicated as it may appear at first glance.
Hopefully, CFDs can prove lucrative over time. So, you don’t have to be afraid of CFDs. However, it is important to learn as much as possible about CFDs.
It is extremely important to select the right CFD broker. Unfortunately, not all traders understand the importance of CFD brokers. You need to remember that the impact a CFD broker can make on both your trading education, as well as research, and your bottom line is huge.
Not all CFD brokers are equally good. For example, some of them offer more than others via better as well as more user-oriented systems.
Unsurprisingly, all CFD brokers like to attract new customers. They like to advertise various features. However, you should be careful when it comes to CFD brokers.
CFD forex brokers
Let’s discuss CFD forex brokers. It is quite hard to compile the list of CFD forex brokers due to various reasons.
Plus500 deserves to be on the list of the best CFD forex brokers. It is a good option for skilled CFD traders.
First of all, it is a specialist CFD broker. It is important to mention that Plus500 offers CFD trading for forex, stocks, commodities, cryptocurrencies, exchange-traded funds (ETFs), options, as well as indices. The above-mentioned broker provides a portfolio of more than 2,000 instruments.
It is authorized and regulated by regulators from several countries, including Australia, Singapore, South Africa, and New Zealand.
Interestingly, the CFD broker allows funding through wire transfer, Visa/Mastercard, Skrill, as well as PayPal. Moreover, it supports a demo account.
Plus500 offers customer support in more than 30 languages. It is noteworthy that Plus500 has a 24/7 online support team.
As a reminder, the broker mentioned above has a proprietary web trading platform called WebTrader. Moreover, it has a mobile app.
Also, you don’t have to worry about a commission fee as there is no commission. But how does Plus500 make money? The broker makes money from spreads.
Importantly, the broker offers leverage of up to 1:30 for retail accounts. What about professional accounts? It offers leverage of up to 1:300. We also need to note that negative balance protection is available for account types.
Forex brokers part two
Apart from Plus500, there are other good CFD forex brokers, and one of them is MultiBank Group. It is a great option for experienced traders.
The above-mentioned broker was founded more than 15 years ago in California. At the moment, it is based in Dubai, UAE. What’s interesting, MultiBank Group is one of the largest derivatives companies in the world. It is one of the most regulated companies as well.
It offers prime liquidity, cutting-edge technology as well as customer service in online financial products. The list includes forex, commodities, etc.
Did you know MultiBank Group serves more than 1 million clients in 90 countries? As you can see, it is a popular broker in many countries.
The goal of MultiBank Group is to deliver excellent products and services to users from around the world.
What’s important is that it has a good reputation. As stated earlier, it is one of the most regulated derivatives companies in the world. It is regulated by 11 financial regulators. MultiBank Group is a well-respected company. So, you don’t have to worry about its reputation.
Now, let’s focus on the advantages and disadvantages of MultiBank Group.
We can start with the advantages. For example, it is possible to contact the customer support department anytime you wish. So, feel free to contact them even outside of regular business hours.
Moreover, it offers access to more than 20,000 trading instruments, including forex, cryptocurrencies, etc. As stated earlier, it is regulated by numerous financial regulators. This is a partial list of advantages. As you can see, MultiBank Group is a good broker.
However, even good brokers aren’t immune from challenges. For example, MultiBank Group must pay more attention to educational resources.
Brokers for novice traders
Not all brokers are suitable for inexperienced traders. However, there are platforms that are suitable for inexperienced traders, and one of them is TradeEU.
The broker mentioned above was founded in 2011. It is based in Cyprus and offers access to more than 250 assets through its user-oriented platform. At an initial deposit of 250 euros, you have the opportunity to test your trading strategies.
There is no need to worry about transaction fees as there are no transaction fees. Besides, you have the chance to select from three account types. Moreover, it has good customer service.
What about the disadvantages?
Investors from the U.S., Canada, Iran, Japan, Israel, and other non-EU countries don’t have access to TradeEU.
eToro is also a good option. Thanks to eToro, users have the chance to invest in cryptocurrencies, stocks as well as ETFs. Moreover, it offers CFDs on currencies and indices. We shouldn’t forget about commodities. It is easy to create a well-diversified portfolio.
The above-mentioned broker is best known for its social media-like interactions between traders. Interestingly, skilled traders also share their knowledge on social platforms.
You don’t have to be a tech guru in order to become eToro’s user. It is important to note that the broker mentioned above charges no commission, earning revenue on the spread instead.
All brokers have their share of advantages and disadvantages, including eToro. There is no telephone support for customer queries. Nevertheless, the advantages outweigh the disadvantages.
Traders and FOREX.com
We can’t finish an article about the CFD trading tutorial without mentioning FOREX.com.
FOREX.com is also a great option. Importantly, it offers 220 CFDs across major asset classes.
No matter what you trade, stocks or commodities, you will gain access to its Advanced Trading Platform. Moreover, you will gain access to the MetaTrader 4 platform and a web-based platform as well as a mobile trading option.
As a reminder, forex markets are open 24 hours a day, Sunday to Friday. What’s important is that FOREX.com is at your disposal 24/5 during open market hours.
We also need to note that the above-mentioned firm offers CFDs only in the Financial Conduct Authority (FCA), which is a financial regulatory body in the U.K. and Cayman Islands Monetary Authority (CIMA)-regulated regions.
Frequently asked questions
What is CFD trading?
It is the method of speculating on the underlying price of an asset – like forex and shares, and more – on a trading platform.
Are CFDs allowed in the U.K. and Germany?
Yes, CFDs are allowed in the U.K. and Germany. Moreover, they are allowed in France, Switzerland, Spain, South Africa, New Zealand, and other countries. What’s interesting is that CFDs are allowed in Hong Kong.
Which CFD forex broker should I select?
There are many CFD forex brokers. So, it is important to learn more about various brokers. You need to take into account various factors when it comes to CFD forex brokers, as not all of them are suitable for all types of traders.