Contract For Differences Trading ( CFD )

Contract For Differences Trading ( CFD )

CFD Is a tool of global trading; it facilitates trading in different markets without the need to own the asset. It is similar to an agreement between the buyer and the seller to pay the difference between the opening and closing price of the current asset. Investing1 plays the role of a buyer in the presence seller, or plays the role of a seller in the presence of a buyer.

We can say that CFD trading is a financial derivative that allows traders to benefit from the movement of financial assets whether they are ascending or descending.

Example of CFD Trading:

In the CFD trade, the buyer pays the difference between the current financial asset to the seller at the time of execution of the contract if this difference is positive. In case of negative difference, the seller pays the difference to the buyer.

Advantages of CFD Trading:

v The possibility of trading all assets without owning them.

v The possibility of trading for the owners of small capital using leverage.

v The possibility to profit whether the value of the asset has increased or decreased.

v Trading large packages such as (currencies, currencies, commodities, indices, stocks).

v There are no government fees.

Potential risks in CFD trading:

If you do not properly use leverage or you do not know the potential risks of the margin system, it may cost you a lot of money because the margin allows you to open larger positions from your account balance. This allows you to earn a high profit and in turn increases your loss. Therefore, we advise new traders to study Risk Management very well.

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