
Ever wondered how you can trade markets without owning the underlying asset? That’s precisely what CFD trading does! Whether prices go up or down, you can potentially make a profit. Sounds exciting, right? Here's a straightforward guide to get you started.
What is CFD trading?
Imagine you’re betting on your favorite sports team. You don’t own the team, but if they win (or lose, depending on your bet), you get a payout. CFD trading works similarly-you’re speculating on an asset’s price movement without owning it. If the price moves in your favour, you profit; if it goes the other way, you take a loss. But remember, just like in sports betting, there’s risk involved too!
Why trade CFDs?
Trade almost anything. From stocks and forex to gold, oil, and even cryptocurrencies, you name it, you can probably trade it as a CFD. At Deriv, you can access all these markets in one place. Plus, cryptocurrencies and derived indices are available 24/7, so the action never stops!
Make money when prices rise or fall. Unlike traditional investing, where you only profit if prices go up, CFDs let you trade both directions. Think a stock is about to drop? You can short it and potentially make money on the way down. It gives you strategic flexibility in both rising and falling markets.
Leverage: Trade larger positions with a smaller capital outlay. CFDs allow you to trade with leverage, meaning you can control a large position with a small amount of capital. But be careful. While leverage boosts potential profits, it can also magnify losses. Risk management tools like stop-loss orders can help keep your account safe.
Get started with a small budget. You don’t need a fortune to start. Since you’re not buying actual assets, you avoid ownership costs like taxes and fees. And with a Deriv demo account, you can practise risk-free before jumping in with real money.
Commonly traded CFD markets
So, what can you trade? Here are some of the most exciting CFD markets:
- Forex: The world’s largest market, where currencies battle it out 24/5.
- Commodities: Think gold, oil, and natural gas—assets influenced by global events.
- Cryptocurrencies: Bitcoin, Ethereum, and more. Highly volatile with potentially exciting returns.
- Stocks: Trade shares of major companies without actually owning them.
- Stock indices: Bet on the performance of an entire market sector, not just one stock
Ready to dive in?
CFD trading offers flexibility, excitement, and plenty of opportunities. It's vital to apply disciplined risk management.
Test your strategy risk-free with our complimentary demo account.
Quiz
Which of the following is NOT an advantage of CFD trading?