Lately more and more traders are turning to CFDs, and for a good reason – with CFDs, you don’t own an actual asset. Rather, you trade based on the predictions of where the certain asset’s price is gonna go. This takes a lot of the edge off from your trading, and makes you feel more in control of your investment.
Also, you don’t need a huge amount of capital to start. Since CFD is a leveraged instrument, it gives you an opportunity for a higher return on a small amount invested. Still, don’t get ahead of yourself – with the higher leverage come higher risks!
CFDs are considered to be a one-stop shop for all your trading needs. How is that possible? Well for starters, you can trade basically everything available on the market – cryptocurrencies, indices, bonds, you name it.
So, to make sure you’ve got your basics covered, here is a brief guide on trading CFDs:
- using stop-loss orders – stop-loss orders are a type of orders that allow you to limit your losses. In other words, when your investment reaches a certain point you’ve previously chose as the lowest limit, your position will automatically close to protect you from further losses
- limiting leverage – as we mentioned before, leverage is higher when trading CFDs. This option allows you to get a higher profit on a smaller amount you invest. However, this can be a double-sided sword – the higher the leverage is, the higher are the risks. This is why it would be wise to limit your leverage to suit your risk tolerance
- doing your homework – we cannot stress this enough, but education is key. Since the market is constantly improving, so should you. In trading, where everything is so unpredictable, each person can find something that will suit only them. So, comparing your accomplishments with other, more experienced traders can be useful to a certain extent, but always keep in mind that the only thing that matters is what works best for you
- keeping your options open – since CFDs give you the opportunity to trade variety of different securities, why not use it? This way you will not only diversify your investments, but also get a better options for possibly minimizing risks.
As you can see, there is a lot of things you can to do make you CFD trading more enjoyable and profitable. We are certain you will find the most suitable one for you!