How to Trade CFDs
What are CFDs?
CFD stands for Contract for Difference. It’s essentially a contract that is made between two parties to trade a financial derivative. A derivative is the value of the financial asset without you having to buy or sell the underlying asset. When you enter the contract between yourself and the CFD provider, both parties will agree to pay the difference in price movements of the financial asset, from when the position has been opened to when the trade’s been closed. A CFD allows traders to speculate on price movements without committing to long-term investments. With CFD trading, you will also be able to access various financial instruments such as Indices or Commodities that may not usually be available in your local market or timezone.
This guide will help you to understand CFDs and how you can start trading financial assets. Before you learn how to start trading CFDs, it is important that you understand what CFDs are and how they work. For more information read our introduction on CFDs here.
- Create a trading account
You will need to find a CFD provider to start trading. Eightcap is a regulated broker and provides access to over 200 financial instruments. You can open a trading account in three easy steps, click here for more. Once you have provided your details and relevant documents you will then need to fund your Eightcap trading account. With us the minimum amount needed is $100, you will be able to deposit money into your account via numerous payment methods.
- Have a trading plan in place
You should have a plan in place before you enter the financial markets. The plan should include your trading goals, attitudes to risk, the markets you want to trade on as well as the strategies you have in mind.
Learn how you can build your own trading plan with our step-by-step guide.
- Know which asset you would like to trade
Once you have funded your Eightcap trading account you will be ready to make your first trade. Access over 250 financial assets including Forex, Indices, Commodities and Shares.
If you can’t decide on an asset to open a position then we have our daily and weekly market updates which can provide you with more information around each market. Our email trading alerts will allow you to react to your chosen market instantly and learn from our market analysis.
- Choose your preferred trading platform
Trade your chosen asset on the award-winning MT4 and MT5 platforms. Access many features across both platforms, giving you an efficient trading experience. Gain access to all our MetaTrader tutorials and guides here.
- Open your first position
Once you have opened up your trading platform, you are ready to place your first trade. You need to decide if you want to buy or sell your chosen asset, depending on if you think its value will increase or decrease. One of the advantages of trading CFDs is that you have the means to either go long or short. Stop losses can be used to minimise any trading risk if the position you open moves against your favour.
Trading on margin is high risk. Losses can exceed deposits.