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CFD Trading Guide to Understanding Leveraged Trading
May 01, 2012 (07:05 PM EDT)
SINGAPORE, May 2, 2012 /PRNewswire/ --
A Contract for Difference (CFD) is an agreement between two parties to exchange the difference between the opening and closing value of a contract.
How is CFD Trading different?
Like traditional trading, where the sell price is quoted as a 'Bid' and the buy price an 'Offer' - through a City Index Asia CFD trading account, investors are offered a sell price if they want to go short on a trade or buy price; to go long.
However, one key difference is the fact that the net result of a CFD trade is the difference between the opening and closing value of a contract. CFD trading enables you to go short in a falling market, enabling you to potentially profit every fall in price.
Alternatively, you can go long if you believe market prices will rise, and your profits will rise in line with any increase in price. If the markets move against you, you will net a loss on your CFD trade.
CFD Trading Example
If you predict a CFD market will rise, you can go long and buy. Your profits will increase in line with any rise on that price.
On the other hand, if you predict the market will fall, you can go short and sell - this means your profits will increase in line with any fall in that price.
Traders can potentially increase their ROI using a CFD as it's a leveraged product.
Leverage means that traders can potentially maximise their market exposure for only a small fraction of the investment typically needed to trade the underlying asset directly.
However, leverage is also a double edged sword, meaning that you could encounter losses greater than your initial deposit amount. As such, you are advised to consider risk management tools with your trades.
As a City Index client, you can trade CFDs on leverage on over 12,000 financial markets whilst using them to hedge your portfolio.
Trade CFDs with City Index Asia
One of the most popular choices for traders is to trade CFDs on major indices, such as:
Most indices are quoted around-the-clock, allowing you to trade 24-hours a day even if the underlying market is closed. CFD trading with City Index Asia offers traders a range of benefits. Remember, trading CFDs on margin carries a high level of risk, which may not be suitable for some investors. Consider your investment objectives, level of experience and other relevant circumstances carefully.
About City Index:
Individual traders are constantly discovering the benefits of derivatives. Many of them discover these through a City Index trading platform.
City Index is a leading global provider of margined foreign exchange, CFD trading and in the UK, spread betting. As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. To learn more visit: http://www.cityindex.com.sg/
SOURCE City Index Asia