5 Best Quora Answers on CFDs

What is Contract for Difference?

CFDs are a type of derivative trading that allows one to try and make profits from speculating on the falling and rising prices of the fast moving and dynamic financial markets or products like indices, shares, currencies commodities, and Treasuries.

A CFD can also be described as a leveraged financial product (derivative) since their value is obtained from the value of other assets such as market indices, shares or commodities. When trading CFDs, one takes a position on the variation in the value of the underlying asset over a period.

All the CFD companies allow traders to trade both long (buying) and short (selling) with the expectation that the underlying asset will either increase or decrease in value. In both scenarios, the trader expects to gain the difference between the closing and opening value of the asset being traded.

What is leverage in trading CFDs?

CFDs allow a person to bet on the rising and falling in currencies, shares, and other assets while only committing a small amount of his or her money. The investors only leverage off the sum of money they have in their possession with the hope of making more. With CFDs, an investor can only commit a fraction of the market value of the asset being traded that can be as little as 1%. The CFD provider covers the remainder of the asset which is 99%.

Although you risk only 1% of your investment, you are entitled to the same losses or gains as if you had paid 100%.

The actual percentage to be invested is dictated by the CFD provider and the underlying assets.

This fact makes CFDs more desirable to most investors since even if you do not have enough money to procure the assets, you can share in the expected gains and losses on the value of the asset.

However when trading with leverage, your gains and losses are magnified, and there is a very high chance of losing much more than you put in especially when you over leverage.

What is the best platform for CFD intraday trading?

The recommended platform will always depend on how you trade. For example;

- If your trading is based on algorithms, automation, and technical analysis, then you are advised to use MetaTrader (MT) platform.

- If your orders are placed manually and your trading decisions are made through a separate analytical tool, then it’s advisable to use CMC market front end.

What are the benefits of CFD trading?

There are a number of advantages that come with the trading of CFDs that include;

  1. Trading on both falling and rising markets

Trading in CFDs allows one to trade the price of an asset going up as well as going down, therefore, letting you benefit from both shorting or selling opportunities as well as buying opportunities. The majority of investors use CFDs as a means of hedging their portfolios through times of short-term volatility.

  1. Efficient use of capital

One of the main benefits of CFD trading is the use of margin while trading. This use of margin gives you leverage thus enabling one to trade without having to invest the full value of a position. This moves also ensures that all your money isn’t tied up in only one transaction, and therefore it can be used for other investments.

  1. Diversification

CFDs give traders the opportunity to trade in different markets and in a wide range of instruments like foreign commodities, equities, and indices. The ability of trading across different markets aids traders to diversify their trading portfolio and spread their risks at the same time.

Is it advisable to trade CFDs so as to make bigger profits?

CFDs are generally leveraged derivatives of their underlying assets like commodities or stocks. Therefore, for a small down margin, a trader can have control over a larger position size. However, this condition magnifies not only the profits but equally magnifies the losses thus it must be used cautiously. It is never advisable to risk more money than the sum available in your account since you might get wiped out when a certain move goes against you. Such a scenario will have you owning your broker and hence receiving a margin call.

In short, when trading CFDs, always think of the risk prior to the reward

Understanding a Contract for Difference

A contract for difference (or CFD) is an agreement between two groups to transact  the difference between the opening price and closing price of a contract.

CFDs always enable you to make the potentially profit irrespective of whether market prices are moving up or down, Unlike conventional forms of trading like physical shares trading.

This means you can potentially profit even during falling markets. If the index moves in the way you predicted, you can profit from every point the S&P 500 falls. ETX Capital offers the right opportunity to traders to use CFD for a better transaction.

Title -Common CFD Trading Strategies

  • Going long CFDs :

Goal: Profit from buying low and selling high
Timeframe: All time frames
Suited to: Experience traders.
Risk Level: Low

  • Going short CFDs – Short Selling :

Goal: Profit from selling high and buying low
Timeframe: All times frames
Suited to: Traders familiar with short selling CFDs
Risk Level: Medium

  • Short term trading CFDs :

Goal: Take advantage of short term movements in the CFD market. Short term trading CFDs can be from days to several months
Timeframe: Days to months
Suited to: All traders
Risk Level: Medium

  • Swing trading CFDs :

Goal: Take advantage of small swings in the market.

Timeframe: 1 day – 20 days
Suited to: All short to medium term traders.
Risk Level: Medium

  • Intra day trading CFDs :

Goal: Take advantage of intraday (within the one trading day) moves and close the position before the market close.
Timeframe: Open and close your position within the same trading day.
Suited to: Experienced traders
Risk Level: High due to small moves requiring large amounts of capital to take advantage of.

  • Position trading CFDs :

Goal: Position yourself based on intraday information with the goal to hold for days to weeks.
Timeframe: Intraday (if stop gets hit) to several weeks.
Suited to: Experienced traders
Risk Level: Medium to high.

  • Zone trading CFDs :

Goal: You believe the market has a memory and ranges between support and resistance levels. You attempt to buy on support and sell on or near resistance levels.
Timeframe: Days to 2 weeks usually.
Suited to: All levels of traders.
Risk Level: Medium.

  • Pairs trading CFDs :

Goal: To take advantage of highly correlated shares that slip out of correlation.
Timeframe: Weeks to months
Suited to: Sophisticated traders.
Risk Level: Low to medium

  • News trading CFDs :

Goal: Monitor news items in the AFR or business section in your local paper plus websites in order to find volatile stocks to trade that day.
Timeframe: Minutes to days.
Suited to: Experienced traders
Risk Level: High

  • Dividend stripping :

Goal: ‘Strip’ the dividend of a stock by buying prior to the stock going ex-dividend and sell before it goes ex-dividend enjoying a capital appreciation as investors jump on board for the dividend.
Timeframe: days to weeks
Suited to: Experienced traders

Risk Level: Medium

 

  • Hedging CFDs :

Goal: Protect current share trades by taking an opposite CFD trade.
Timeframe: days to years potentially if your stock doesn’t come out of a downtrend.
Suited to: Owners of shares

Risk Level: Low

Benefits Of Foreign Currency Trading Online

Gone are the days when foreign currency trading was the business of big financial institutions and big investing firms. Internet technology has revolutionized the platform and everything related to the trading of financial assets has become quick and easy. The placing of orders to buy and sell, educating on investment options, knowing the market positions and everything related to trading online has become fast and quick. Here are the top reasons why more and more people are constantly heading towards playing the market through trading online.

Foreign currency trading online eliminates the middleman

Before the coming of online trading, you could not start with foreign currency trading without your broker. There was no such facility of online trading and all you had to do was to meet or call up your broker. Now online traders can easily buy or sell assets without speaking to a physical broker. This however does not mean that there is no middleman involved. The broker is actually involved as a middleman but the communication with a person is eliminated for making trades or other activities. Online trading allows you to trade virtually without any direct communication to a broker.

It is a cheaper way of trading

Since there is a big competition among the online brokers, trading online is a cheaper option than trading offline. The price of trading continues to drop as there is a big completion among the online service providers who also get the benefits of providing services through fast and secure networks.

Trading online offers greater control over your investments

When you trade offline you have to rely upon the broker to execute as well as manage all the controls over the investments you make. But with the possibility of foreign currency trading online, you can manage and control all your investments with the clicks of the mouse. You had to wait for the delays done by the offline broker in offline trading but with online trading the scenario is different and the execution is instantaneous. Your trade orders are executed instantly and management of your portfolio is fast and easily done.

Ability to trade from home and any part of the world

The best advantage of foreign currency trading is the ability and convenience to trade from home with just a click of the mouse. The only thing you need is a computer or a Smartphone with a fast internet connection and a trading online account at https://www.xtrade.com/. This was not possible with offline mode of trading and online trading has changed the scenario completely. Now online traders are able to make extra income through online trading easily with their own convenience. Those traders who are not able to stay at a single place also find online trading as the best convenient platform for financial trading.


 

DIY-Not

DIY ( Do it Yourself) is getting more and more popular with the growth of sites like Pinterest. Every day we experiment with new home projects or ways to keep our kids busy, but did you know that DIY has its advantages with restaurants as well? As long as you are smart about the way you handle any projects your restaurant (existing or in the near future) you can save a TON of money without compromising on quality.

 

Once you pick your new spot, it may come with some much needed repairs. While it is quick and easy to jump on the phone and hire a painter, contractor or plumber, look into the things you can do yourself and actually do them! Pick out a fresh new paint and get to work! Go to a local outlet store and start buying some decor! You’d be surprised by how much you can save when you actually take the time to plan it out.

 

Another way to save is to find products at a discounted rate, without going through a 3rd party to find it for you. This is more of a literal DIY, but still applies nonetheless. For example, if you are in need of chef wear for your chefs, you can find them at a discounted rate at Restaurant Discount Warehouse instead of those more expensive places where you have to go through a sales rep.

 

There are always ways to cut corners and DIY, and these are just a few. Be creative and be willing to try new things and you will succeed no matter what!

Are You Interested in a Career on Wall Street

Are you interested in a career on Wall Street? If you are, then you have your choice of options. The amount of money you could make as a stock broker on Wall Street can depend a lot on your level of education, experience and training. It also depends on the current market state and the current economic conditions. The New York Stock Exchange is for people who can think fast and who are good with numbers. If you are interested in such a career, you may have to consider the following tips:

Before you are able to work on Wall Street, you may first think about getting a college degree. This is not a requirement, but a recommendation. A bachelor’s degree can provide a clear advantage for people who earn it. For improving your chances to find a good job, you could get a degree in accounting or finance.

The preparation phase should begin from your last year of college. Don’t wait until you graduate, as there are firms that can offer you an internship. You will be able to work while you are still in college and earn some experience. Write your resume and apply to different companies on Wall Street. Don’t forget to write about your grades, your work experience and any proof that you are an ambitious and hardworking individual. Make sure you include all the references.

It can be very hard to work for a company on Wall Street from the beginning, so you may have to begin with some of the available satellite firms. The company that you choose must be a member of FINRA (Financial Industry Regulator Authority). After four months have passed from the moment you became employed, you can take the series 7 licensing exam.

The employer may apply to this exam for you. The template of the test is available online, so you can download it and familiarize yourself with it. There are more than two hundred questions with multiple choice answers and the duration of the test is of six hours. Study and prepare yourself for months before the exam by taking a Series 7 course. If you pass the exam you will get a license. But, this license is not permanent. You will have to update it every year.

If you don’t find a job on Wall Street immediately, you will have to work for many years for a satellite firm, in order to get the training and experience necessary to become a successful Wall Street stock broker later. There is a lot of competition in New York Stock Exchange and you have to be well-prepared for it.

It would be wise not to have any regulatory issues or compliance problems in your record. Brokerage companies on Wall Street avoid hiring any suspicious brokers. Not only that you will have to maintain your record as clean as possible, but you also have to make it to look impressive. This can be done by achieving high commissions while you are working for a satellite firm. Visit www.stockbrokersalary.bizregarding more information on financial careers on wall street.