What are CFDs? Trade with CFD contracts
Learn about CFDs with idolmeta.net and how to trade with CFD contracts in the following article.
CFD contract concept
CFD stands for Contract For Difference – “Contract for Difference”.
A CFD is a contract for the difference between the value of an asset at the time the contract opens and the time the contract closes.
You will profit from the difference in the price of the property through trading even though you do not actually own the asset.
From the concept it can be inferred that contracts for difference will take advantage of volatile prices instead of the traditional buying and selling of buy low – sell high.
Products for trading with CFD contracts
Because it is a derivative product, the products of CFD contracts are also extremely diverse. From traditional financial products: stocks, bonds, forex, commodities… to specific products like cryptocurrencies.
- Forex CFD trading: this is the largest CFD market today with a huge trading volume as well as a variety of currency pairs: EUR/USD, USD/JPY…
- Index CFD trading: A list of the world’s largest stocks such as US30, NAS100…
- Commodity CFD trading: Including commodities such as Gold, Silver, Crude Oil….
- Trading stock CFDs: Top tickers like Apple, Facebook, Google, Tesla….
- Cryptocurrency CFD trading: This is a newly developed market since 2017 but after only 3 years, cryptocurrencies have become an equally potential segment with even an outstanding fast growth rate with many coins. coins like: BTC, ETH, BCH, DOT, LINK…
Benefits of trading with CFD contracts
Wide range of trading products: As mentioned above, there is a wide variety of trading products for CFD contracts for you to choose from.
- Large Leverage: CFD contracts give you leverage that gives you many opportunities to trade for large profits with a small amount of capital (If you do not know what leverage is and how to trade it, please read: Read it in this post).
- Optimal profit: There will be no investment environment where you can get a profit of 3-5 times even 10 times of the initial capital after just a few days. But if you use leverage, this can happen.
Ví dụ: Bạn mua giá ETH ở mức 920$/1ETH và khi giá lên 1012$ bạn mới lời 10%. Nếu sử dụng đòn bẩy x10 bạn sẽ lãi 100%.
- The market is wide open thanks to the variety of products: thanks to the variety of products, you can reach the market at any time, anywhere.
- No need to directly own the product: Because of the CFD contract, you do not need to directly own the product and still be able to trade. For example, in some countries there are strict regulations allowing buying and selling of indices or coins/tokens, but with CFDs, you can buy and sell in any country.
- Reasonable transaction costs: Each exchange has a different user attraction strategy, but in summary, almost all exchanges have low transaction costs that are suitable for users.
- Cross-platform trading is simple: there are a variety of exchanges serving the needs of CFD contracts: Bingbon, MT4…
- No Maturity: CFD differs from derivatives in that it has no “Contract”, and no expiration date. Thus the user can hold the position for as long as he wants.
Limitations when trading CFD contracts
Of course, along with profit opportunities, there will be more risks when participating in investments, let’s go through the limitations you should be especially careful when trading CFD contracts:
- Leverage- pros and cons: Using leverage, especially large leverage, can help you get quick profits with a small amount of capital, but it can also make you lose all of your invested capital. fast.
If you use improper leverage, it can lead to losses that you do not plan to control, which will be lost.
- Risks from greed: When investors make quick and easy profits, it is also when they let their guard down the most. Confidence that they can easily earn profits causes many investors to lose their initial investment.
- No control over order costs: Each transaction has a cost, if you participate in an investment without the necessary calculation, it is likely that you will not gain much profit after deducting costs. .
Experience in trading with CFD contracts
- Risk management is extremely important: You are involved in investing, but to summarize every week, every month you win and earn profits in addition to technical analysis, market analysis, risk management is extremely important. important.
- Choose the right leverage: A lot of newbies to trading find that their predecessors have a lot of experience, so they use large leverage. But being a newbie does not have analytical skills, so soon the account is gradually exhausted. Choosing the right leverage is also a key to reducing trading risks.
- Understand the fees of the exchange: If you are trading at any exchange, then carefully study the fees such as: Opening-closing fee, Funding fee, Overnight fee…
- Use the utility of the exchange: Some exchanges have many trading bonuses for active users, you can both make money and participate in these bonus contests to increase your profits.
- Always set a stop loss: the market is always changing, and CFD contracts carry a lot more risk than other markets. If unfortunately your trade is not successful, boldly cut your losses and wait for another opportunity
- Choose the right exchange: There are many CFD brokers today, but after the trading process, I found that the best CFD broker is Bingbon. See more reasons why I choose Binbon through the following article.
Contracts for difference CFDs is not just a fad, it is an inevitable trend of any financial industry and cryptocurrencies are no exception. Choosing the right method can help you generate good profits for yourself.