Author: Luke Mitchell

CFD is short for Contract for Difference and is a derivative form of trading. The main attractive feature about it for traders is that it allows them to wager on the constant change of prices for assets like shares, commodities, indices, foreign exchange and treasuries in a way that is very cost efficient.

If a trader is confident that the price of an asset will go down they can buy it. In trading terms, that is to ‘go long.’ If they feel the price will go up can ‘go short’ which means to sell. Part of the cost efficiency in CFD trading is that it allows you to trade on margin, as in you do not have to expose the full capacity of your financial position in the market. And since you do not necessarily have to own the assets you are trading, you are not required to pay for stamp duty.

How does CFD Trading work?

As mentioned earlier you do not have to own the underlying asset to trade. Depending on the direction you think the prices will take off in, you simply need to buy or sell a certain number of units of a certain asset. These assets or instruments can be shares, indices, currencies etc.

Here are more CFD Trading articles:

• Is CFD Trading a Scam?
• How Safe Is CFD Trading
• Can a Beginner Make Money with CFD Trading?

The fluctuation of prices is determined in points. For every point the price moves in your desired direction, your profit will multiply according to a number of units you have either bought or sold. For every point the price moves against you, your loss will be calculated in the same fashion. It is important to note that a potential loss can go past your initial deposit.

1) Leverage and margin

Since in a CFD trade you only have to deposit a minute percentage of the entire value of an instrument in order to trade, it is considered to be a leveraged product. The fact that you do not have to purchase the entire instrument and open a position with a minor percentage means that you are trading on margin. The upside is that you can make a significantly high profit out of a relatively low deposit. The downside is this same principle applies when it comes to losses. In fact, you stand to lose more than your initial investment.

2) Costs involved in CFD trading

• Spread: The spread refers to the difference between the buying price and selling price of a trade. You will enter into a trade with the buying price and exit using the selling price. The smaller the spread between the two, the lesser the price must move before you stand to make a profit… or a loss.
• Market data fees: A trader is required to open a subscription to access details of prices on the market. A fee is charged for each subscription.
• Holding costs: If there are positions open on your account by the end of trading time for the day, you may be liable for a charge known as a holding cost. It could either be a positive or negative going by the holding rate applicable and your position’s direction.
• Commission: This applies for shares only. A minute percentage of the marginal value only is charged as a commission for each CFD trade. For trades based in the UK for instance, commission charges begin at 0.1%.

Conclusion

As a novice trader, it is good to begin with a demo account until you are more familiar with the system. CFD trading is a great way to make substantial revenue out of tiny investments. However, it does come with its own unique set of risks but that is all part of playing the game.

How to Choose the Right CFD Broker

When it comes to CFD trading choosing the right broker is crucial.

There are several factors to consider when selecting a CFD broker including regulations fees trading platform and customer support.

To ensure the safety of your funds it is important to choose a regulated broker.

Look for brokers that are licensed by reputable financial authorities such as the Financial Conduct Authority (FCA) in the UK or the Australian Securities and Investments Commission (ASIC).

In addition to regulations consider the fees charged by the broker.

This includes spreads commissions and any additional charges such as inactivity fees.

Compare the fees of different brokers to find one that offers competitive rates.

Another important factor is the trading platform.

Look for a platform that is user-friendly reliable and offers advanced features such as real-time market data charting tools and technical indicators.

A good trading platform can greatly enhance your trading experience.

Lastly consider the customer support provided by the broker.

Look for a broker that offers responsive customer support through multiple channels such as phone email and live chat.

This will ensure that you can get timely assistance whenever you have a question or encounter an issue.

In conclusion choosing the right CFD broker is essential for successful trading.

Consider factors such as regulations fees trading platform and customer support to find a broker that best suits your needs.

By doing thorough research and comparing different brokers you can make an informed decision and enjoy a seamless trading experience.

CFD trades and Binary Options trades certainly have their similarities, but they also have some very clear differences. Often times, traders are curious as to whether they can utilize the two forms of trade in tandem with each other to maximize their returns on their investments.

To understand if this is possible we must take a comprehensive look at the two trading platforms and put them side by side to see exactly what’s what.

In this article, we will briefly go over the similarities between CFD trading and binary options trading and a more comprehensive assessment of their differences and hopefully draw out a rational conclusion.

So before we dive into the differences between binary options trading and CFD trading, let us reacquaint ourselves with their similarities. To start off with, they are both derivative forms of trading. They are both a departure from the stock market and currency market trading. Secondly, they are both small scale investments and carry significantly lower risks. Both with CFD trades and binary options trades, there can only be two outcomes and two main options. The trading time frames involved with these two forms of trading a feverishly quick compared to other forms. To start trading in binary options or CFD does not require a substantial initial investment to get you started.

How is CFD trading different to binary options trading?

First off, awareness of your profits or losses. With binary options trading, this is a clear cut issue. All the information you need to know in the event of a profit or loss is displayed before you call an option on a trade. You will know before the time of expiry, the pay-out rate you will receive if your prediction is accurate as well as the loss you will incur if your prediction is not.

In the case of CFD’s you will be in dark regarding your exact percentage of profit or loss until the time that the trade expires making it altogether trickier to deal with. This is by default, a result of the difference in the entry and the close price which can vary. So traders cannot know for sure where their investment will go till the absolute ending of the trade.

In order to be involved in different markets at a relatively cheaper rate, CFD trading requires traders to pay extra commissions for brokers as well as trades. These fees are not fixed as such and can change with each broker. This is unheard of in binary options trading circles. There are no commission, fees or leverage whatsoever.

The problem with leverage in CFD is that in the event of a trade backfiring, your loss can exceed your initial investment and that can be a nasty defeat. With binary options, a loss can never go past the initial deposit.

• Is CFD Trading a Scam?
• How Safe Is CFD Trading
• Can a Beginner Make Money with CFD Trading?

What’s more, binary options brokers will actually propose to refund a percentage of the losses incurred by traders if they end up out the money. That percentage is usually around 10-15% but it certainly is something.

On a global scale, binary options trading is the wider form being practiced. In the United States, for instance, CFD trades are not legal although binary options are so long as they are licensed and regulated.

Conclusion – CFD Trading vs Binary Options Trading

While there are similarities, after putting them side by side, it would seem that binary options trading comes off as a less risky form of trading to engage in.

Perhaps the most logical conclusion one can draw from the differences is that binary options trading is the more popular method and more risk friendly, especially to early traders. CFDs are more the territory of experienced traders who have played and figured out how to stay in the game many a time.

Differences Between CFD Trading and Binary Options Trading

One of the key differences between CFD trading and binary options trading lies in the way that profits and losses are determined.

In binary options trading the potential profit or loss is predetermined before the trade is made.

Traders are aware of the exact pay-out rate they will receive if their prediction is correct as well as the loss they will incur if their prediction is incorrect.

However in CFD trading the exact percentage of profit or loss is not known until the trade expires.

This is because the entry and close prices can vary making it more challenging for traders to gauge the outcome of their investment.

Additionally CFD trading often involves paying extra commissions to brokers and for trades whereas binary options trading does not have any fees or leverage.

This difference in cost structure can impact the overall profitability and risk exposure for traders.

Overall the differences in profit and loss determination and cost structure make binary options trading a more straightforward and potentially less risky option for beginners while CFD trading is often favored by more experienced traders.

A fully licensed and regulated broker is the way to go, if you are looking for trustworthy services.

We have tested over 60 brokers. I would recommend you only sign up with regulated and licensed brokers that we recommend.

As soon as we think a broker is a scam we list them on our scams page.

We have dug deep to find more information about the license of ForTrade. As you can see here, they are listed on the FCA page (Reference number: 609970).

It is merely a sign of approval from a governmental authority to reinforce its competence and ability to deliver justly on your investment.

For all the reasons stated above, we see no reason why a traders shouldn’t trust this broker.

Best CFD Brokers That Are Not Scam

All of these brokers offer CFD trading in addition to other forms of trading. These brokers are regulated buy a trusted authority, therefore they are considered to be very safe.

Rank	Broker	Min. Deposit	Regulated	Features	Review
2		$250	YES	+ US TRADERS	VISIT NOW
3		$100	YES	+ UK FCA LICENSE	VISIT NOW

In order to ensure the game you are playing is not rigged against you, you must investigate the industry as deep as you can.

Scams in Stocks Trading

The usual complaints associated with stock trading are the little things like commissions, fees and services. However, the online community is also awash with hundreds upon hundreds of nasty accounts of customers who feel betrayed by their broker and seek to warn others about them. The brokers in question are not exclusive of high repute and global recognition for trustworthy services.

That said, it is just as important to take this stories with a grain of salt since a lot of customers are not particularly articulate about the alleged scam that occurred and may not have fully understood the official terms & conditions involved before lodging their complaints.

Scams in CFD Trading

CFD trading is generally considered to be a relatively riskier form of trade and is not legal in the United States while Forex trading is. The main reason for that is it in the interests of most of the futures and stock trading industries to keep CFD trading out of the competition.

It was certainly not out of compassion for traders to spare them from making a reckless mistake and losing big time on their funds. Without CFD trading in the picture, any lost funds would likely be theirs.

The answer to the question of whether or not CFD trading itself is a scam is a no.

CFD trading is simply a derivative form of trading that allows traders to trade in numerous markets on a global scale using a single account accompanied by its own unique features.

Leverage Can Be Risky

It is on the riskier side of the different trading forms as it carries the option of using leverage. You can leverage your account up to hundreds of times over what it is actually worth, but you will be taking an enormous financial risk there.

The idea is to take calculated and controlled risks so that you have a greater possibility of using this form of trade in an efficient and safer manner without risking too much of a financial downfall.

It is best advised to invest in CFD trades that are under the value of your own account so that you will not be using leverage so it will be less likely in the event of a loss that you would lose more than your initial investment. Using leverage, you stand in a position to win a lot of money as well as lose it and in CFD trading, the final outcome is notoriously difficult to predict until the time the trade expires.

There are a whole bunch of other factors. These have the capacity to be exploited and manipulated in order to extort money from the traders.

These shady operations are usually the work of unlicensed and unregulated brokers who lure customers in with false hopes and promises.

So Is CFD Trading a Scam?

So can these forms of trading be classified as scams? Definitely not. As long as you know how they work and calculate well the risks involved, you can be assured fair play in your online trading activities.

CFD Trading is realyl exciting and you can make a lot of money with it.

So what exactly is CFD trading?

Obviously, before you begin trading in CFD you should get a firm grip on what it is all about.

As trading has taken to rapid expansion online from its more traditional forms, many new concepts have developed with attractive features that have attracted a global community of trading brokers and their numerous clients.

CFD Meaning

CFD or Contracts for Difference trading is derivative form of trading designed to give traders unique access into the various active global markets and assets.

• It is very much part of the modern trader’s tool kit to maximize returns on investments.
• It is risky to use relative to other forms of trading and its most successful users are usually veteran traders with a wealth of experience and tactical acumen for playing the market.
• CFD trading does share some similarities with the more popular binary options trading platforms, however with some unique features of its own that pose a higher element of risk to traders.

It too offers just two options for traders; either to ‘go long’ and purchase a contract or ‘go short’ and sell it.

A key feature of all CFD trades is that they are a margin type of trade. It is never the price of the entire trade that is opened but merely a small part of it.

And since you are not the actual owner of any given asset, you are not liable to pay a commission for stamp duty. So they are cheaper to invest in. Each trade is dealt with in currency, and how much of it is acquired by your account is down to how well your skills in the trade really are.

How can I get started?

If you want to try out CFD trading for yourself, all you have to do is to follow these simple 3 steps:

What you can trade with CFD trading

The type of instruments you can trade are shares, indices, commodities, foreign exchange and treasuries. All of these are relevant to domestic and foreign trades.

Choosing a CFD service provider

When it comes to this decision, there are two main business models to consider: Spread pricing and Transparent pricing.

• With the spread pricing method, your CFD provider will offer you a price to work with that is not the same as the underlying price. This way they can still make money without charging you with a separate commission. The main drawbacks of this method to be mindful or are firstly: you will not know in advance an exact amount of what the deal is going to cost, and secondly: the price that has been quoted will only work one way.
• With transparent pricing, the price that has been quoted by the CFD provider is a reflection of the actual underlying price. And as a trader, you will have to pay a commission for each trade. And unlike with spread pricing, the quoted prices can work both ways.

Associated risks with CFD Trading

CFD trading offers traders the option of leverage. This enables them to buy assets that are hundreds of times over the value of their actual account. If the trade works out in their favour, they will win big money. However, if it does not, they will lose much more than what they had initially invested. This is the main reason why CFD trading is more for experienced professional than amateur traders.

Conclusion

So can a beginner make money from CFD trading? In theory, yes, absolutely. In reality however, best play it safe and hone your skills in less risky trading environment before taking your first shot at it.

The Importance of Risk Management in CFD Trading

When it comes to CFD trading especially for beginners managing risk is crucial.

CFD trading involves a high level of risk and without proper risk management measures in place beginners can quickly lose their hard-earned money.

One of the key aspects of risk management is setting entry and exit criteria for trades.

This means defining your stop-loss and take-profit orders before entering a trade to limit potential losses and lock in profits.

It’s also important to diversify trades and not put all your eggs in one basket.

This involves spreading out your investment across different assets or markets to minimize the impact of adverse price movements.

Additionally beginners should start with small positions and gradually increase their exposure as they gain more experience and confidence.

By following these risk management techniques beginners can improve their chances of making money in CFD trading while minimizing potential losses.