CFD trading: Magic tricks
CFD is an abbreviation for Contract for Difference, giving you the opportunity to own a position in any currency, equity, index, or commodity without necessarily own the underlying instrument.
CFD can be any financial instrument. It is not limited only to shares (as many believe), but can also be applied to foreign exchange, commodities, indices and other financial instruments.
CFD trading practices
When you have a practical foundation to understand something, it gets easier. Let us explain CFD trading so it really goes on in practice:
Martin buys 1000 shares of Google from your online broker. Kristian buy instead 10 CFD contracts in Google. If Google stock goes up $ 5, Kristian will earn $ 5,000.
Advantage of CFD trading is that there is no commission. When we know that the commission is one of the main reasons why so many active traders fail, so it goes without saying that this is a big advantage. When the brokerage fee is out of the picture will be a lot better to trade in financial instruments. Another important aspect of CFD trading is that it is a much more efficient way to shop for traditional trade finance instruments.
Where can you buy CFDs?
Not all online brokers offer free CFD trading. Once you find one online broker that offers free tradeing opportunities, it is not certain margin requirement is so much to brag about. There are simply not that many CFD services like both free trading and favorable margin requirements.
easyMarkets has more affordable margin requirements than most, and you can also trade CFDs on one of the world's best financial trading platforms. We are cautious in recommending the services here, but it is not without reason that we prefer the easyMarkets, a better option than this you will find anywhere.
Leverage trading in CFDs
Leverage trading is perhaps the biggest advantage of CFDs. Even with little capital to buy large holdings in currencies, shares, indices and commodities. For example, if you have 1000 money can buy CFDs currency worth 50,000 dollars. We have here a margin ratio of 1:50, which is the maximum offered by easyMarkets.
Margin Trading on 1:50 must be regarded as wild speculation, but it would still be interesting, there are brokers who offer even higher margins than easyMarkets, but there is really no practical usage for leverage trading over 1:50 (personally I think 1:20 is as high as I go).
Another platform that offers extreme margins of used currency is easyMarkets. With a margin trading at 100:1, they are a good distance from eToro, but still more than enough margin even for big gamblers. With as little as 1000 dollars you can hold positions for 100,000 dollars, then it goes without saying that the risk of loss is great, but so are the potential upside is also what makes people still choose to invest in such high margins.
easyMarkets has thus far lower margin than both eToro and easyMarkets. The service is not worse because of that. Pros is rare for more than 1:20 in the margins anyway, and when this is considered extreme speculation, so with 1:50 with easyMarkets you to practice more than enough margin to go on.
CFD trading with easyMarkets - because they have no commissions and low spreads.