A Contract for Difference (CFD) is a financial agreement between you (the trader) and FXTRADING.com (the broker). This contract allows you to speculate on price movements of financial instruments without actually owning the underlying asset. The core principle is simple: you profit from or pay the "difference" between the opening and closing prices of your trade.
Key Features of CFD Trading
No Physical Ownership: CFDs don't involve delivery of physical goods or securities
Leverage Access: Trade larger positions with a smaller capital outlay
Two-Way Trading: Profit from both rising markets (going long) and falling markets (going short)
Diverse Markets: Access multiple financial markets through a single platform
Price-Focused: Only the price change matters, not the underlying asset's intrinsic value
How CFDs Work
When trading CFDs, you're essentially predicting price direction. If you believe a price will rise, you open a buy (long) position. If you think it will fall, you open a sell (short) position. Your profit or loss is determined by the difference between your entry and exit prices, multiplied by your position size.
For example, if you buy a CFD on gold at $1,800 per ounce and sell when the price reaches $1,850, your profit would be $50 per unit traded (minus any applicable fees).
Benefits of CFD Trading
Market Versatility: Trade across different asset classes including forex, indices, commodities, and cryptocurrencies
Capital Efficiency: Use leverage to maximize potential returns on your investment
Hedging Capabilities: Protect existing portfolios against short-term market downturns
Transparent Pricing: CFD prices mirror the underlying market prices
Flexible Position Sizes: Scale your trading according to your risk appetite
Remember that while CFDs offer significant opportunities, they also carry risks due to leverage and market volatility. Always trade with a clear strategy and proper risk management.