CFD trading is one of the most lucrative investment strategies today. For those who are new to trading and the investment business in general, CFD trading is one of the easiest ways to get started with trading and leverage without the need for a huge financial investment. With leverage, however, comes risk, and with risk comes significant potential reward.
What is CFD trading? CFD means “custodial derivative”, which means that it is an agreement or contract for the exchange of a financial instrument. A CFD simply stands for “custodial contract for difference”, which is a kind of derivative which allows you to trade more leverage and smaller margins.
The difference between this contract and an equity share, for instance, is that in the case of CFDs, you need to pay not only the interest rate of your margin but also the margin fees as well, which can sometimes represent a sizeable portion of your account capital.
CFDs are traded over the phone, through electronic mail, by fax, and online through brokers’ platforms. If you choose to trade over the telephone, you will pay a commission to the broker per trade (this is referred to as opening a CFD trade), and you will have to pay for both the CFD trading platform and the telephone call made to start the trade.
If you choose to use the online method of cfd trading South Africa, you will pay for your CFD trading platform service (which is known as a CFD trading platform), along with the commission for the trade. Your opening trade and closing trade will be funded by you, depending on your choice of CFD broker. However, you will also have to pay for your CFD trading account, as well as other fees such as clearing and settlement services, if applicable.
CFDs differ from traditional derivatives in that they do not require any additional collateral for the trade. You may choose to offer your shares of stock or other underlying assets as collateral, though many brokers offer you a discount on your CFD trading margin. However, if you choose to use your own money to offer security, you must ensure that you know how much your shares are worth at this point, to provide sufficient leverage to help you win trades and to prevent losses. CFD brokers may offer you different margin options, which can make the selection between them quite difficult.
CFDs can be used in most major markets around the world, though some smaller or less well-known markets still allow you to trade via CFDs. They began as an alternative to shares in major markets, but their popularity has grown since then. You can trade in commodity markets, indices, commodities, fixed income securities, and foreign exchange markets using a CFD trading platform, and many brokers will offer this service to new customers.