CFD 

Contract for Difference (CFD) - a contract between a trader and a broker, with which you can earn on the price difference of any underlying asset at the time of conclusion of the contract and the current price.

The underlying asset in this case can be both goods and raw materials, stocks, bills and other types of valuable assets. In essence, CFD is a comparison of the movement of the real quote price with the price specified in the contract, the resulting difference is the profit. There are no strict restrictions on the assets for which contracts are concluded. As a result of this, many markets are available to traders: stock markets, commodities, raw materials, securities, stocks, and many others. The most popular underlying assets are stocks. It is important to understand that the main thing in CFDs is the speculation on the price difference, and not the actual sale of any asset. Thus, you can earn on the shares of major companies without even buying these shares.

The logic behind the contracts for difference is very simple. For example, if a trader is sure that the price of a specific underlying asset (and this can be almost anything) will increase, he makes a deal with the broker. You don’t receive the asset; a contract is enough. And if the price rises, the trader will receive a certain profit, if it falls, the trader will receive losses. Naturally, the more expensive the asset, the more profit you can get.

Another important note: you do not need to wait for the completion of the contract in order to close it, as is usually the case with forward contracts. You can trade at any time, regardless of the timing.

CFD trading has a range of benefits that are usually provided by brokers.

• • Direct access to a large number of different markets where you can trade.
• • Lack of commissions. Since a CFD contract is a contract between a trader and a broker that is not an underlying asset, you are not charged commissions. Transactions occur instantly, and commissions are often within in the spread.
• • The ability to trade with leverage. This allows you to purchase more without your own money and increases the potential profit. On the other hand, this increases the risk of losses.
• • Possibility of no fees. Depending on the tax base in a given country, CFDs are not exempt from duties.
• • Market volatility helps keep CFDs up to date.
• • The margin required to open a position and the margin that maintains this position while the market moves in a loss-making direction are equal.
• • The ability to hedge risks, if necessary.
• • You can use a huge number of trading instruments on one platform.
• • No restrictions on opening short positions. They can be opened at any time and in any quantity.

The CFD market has certain drawbacks

• • Many risks due to minimal control. The CFD market is poorly controlled, because there are scammers and unreliable brokers.
• • Lack opportunities for quick deals. If you are a lover of scalping, then CFD’s are unlikely to suit you, because the spread is fixed

A lot of traders use a trading strategy, focusing on the news. It is there that you can find out the prerequisites of market volatility, including the most significant leaps and changes in trends. In CFD trading, this is fully utilized.

News has a strong influence on the prices of many assets and given the fact that the CFD market is usually for short-term trading, traders should carefully monitor the news and changes in the world economy.

News trading, as such, is based on news press releases that are ahead of standard news and are a key source of information for traders. Thanks to press releases, traders can speculate on asset price volatility. At the end of each month, traders are closely watching the release of NFP - the US economic jobs indicator. Usually after the release of NFP that market often experiences major volatility and fluctuations, which can be beneficial for CFD traders. But any fluctuations in the market can carry both positive and negative consequences. Therefore, traders as a rule do not open large deals before the release of news indicators or press releases.

Therefore, experienced CDF traders carefully monitor the flow of news, so as not to miss the chance to increase profits or the ability to reduce risks.