Learn How To Trade CFDs CFD Trading Course At CAPEX.com

CFDs are traded by millions of traders all across the world. They provide easy access to a huge range of assets, allow you to trade without owning any underlying assets, and offer high leverage requirements. But how exactly does CFD trading work, and how can you get started?

In this CFD guide, we reveal everything you need to know to learn how to trade CFDs. We’ll explain exactly what CFDs are, how they differ from other assets, and explain the fees you need to consider. We’ll then show you how you can start trading CFDs at CAPEX, where you can trade thousands of CFDs at incredibly low prices!

Author:

Roy Connor

Last Updated on:

08/03/2023

Topic:

Trading

Wide range of assets

Many traders like to diversify their portfolios by trading lots of different assets, but not all CFD brokers are able to fulfill those needs. That’s not the case with CAPEX. Whether you want to trade stocks, forex, crypto, indices, ETFs or bonds, we’ve got you covered. There’s loads of choice in each asset family as well – for example, we have over 2,000 stock CFDs and more than 50 forex pairs. Don’t forget about our CFD blends, unique baskets of stocks that reflect certain industries.

Excellent trading tools

We know how important it is for traders to have a high quality trading platform in place with the right tools you need to execute your strategy. And that’s why we’ve put in tonnes of work into producing one of the best trading platforms on the market.

Our platform offers a huge range of tools to help you trade, including a range of price charts and time frames, numerous execution modes and order types, lots of different technical indicators and analytical tools, and the ability to use up to ten charts simultaneously. We also offer access to MT5, where you can use even more trading tools and features.

What are CFDs?

CFD stands for contracts for difference. They are derivative trading instruments, which means they allow you to speculate on the price of assets like stocks, forex and commodities, without actually owning the underlying assets. When you trade at CAPEX, you’re trading CFDs.

How do CFDs work?

A CFD is a contract between a buyer and a seller, with the buyer paying to the seller the difference between the value of the asset and its value at contract time. With CFDs, a trader can be both a buyer and a seller, as can a broker. Want to learn how to trade CFDs? Continue reading.

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How is CFD trading different from other types of trading?

There are several important differences to note between CFDs and other types of trading. In this part of our CFD guide, let’s look at how trading CFDs differs from actually owning assets.

CFDs vs Owning Assets

Traditionally, stocks have been traded by traders actually buying, owning and selling the stock. However, if you trade a stock CFD, you’re not actually owning the stock. Instead, you own a contract that depends on the value of that stock. If the stock rises in value by 5%, so does the CFD.

There’s not really any major difference between trading a stock CFD and an actual stock in terms of how the trade pans out. You’ll even be entitled to stock dividends as long as you own the CFD the day before the ex-dividend date.

It’s the same with crypto trading. With CFDs, you can trade on the price of cryptos without owning them. This means you don’t need to worry about having a crypto wallet to store your coins in.

CFDs vs Options

CFDs are often compared to options, which are other trading derivatives that let you trade on the price of things like oil and forex without owning any underlying assets.

Whereas a CFD is an exchange of the difference in an asset’s price from open to close, an option is a buying or selling of the right to trade at a fixed price, wherever the underlying market moves. For example, let’s say you think Tesla stock will move up from its current level of $655. You can buy an option that allows you to buy it for $660 any time in the next month, so you’re quids in if it moves above $660. You may have to pay a premium to do this, and the premium is all you lose if it doesn’t go up.

The main differences are that CFDs provide exposure to a wider range of markets, are easier to grasp and use, and are more transparent as they directly move with the underlying market.

You can read our CFD vs options guide to learn more.

CFDs vs Futures

Like with options, people often wonder about the differences between CFDs and futures, another form of derivative contracts in trading.

A future is a contract in which a buyer and seller agree to exchange an underlying market for a predetermined price at a future date. Futures are often used to hedge against the market – for example, an airline can buy oil futures to hedge against rising fuel prices. A future means you can potentially buy something at an agreed price even if it’s cheaper than the market value at that time.

Futures differ from CFDs in that they are generally traded on exchanges and are less liquid, whereas CFDs are traded directly with a broker. They are also less flexible and are often too expensive for small scale traders due to the rigid nature of most futures contracts.

Award-winning broker

Any broker can say they’re worth your time, but how many can actually prove it? Are you looking to learn about trading with a friendly broker? Then you’ve come to the right place, because we were named Best Forex Educational Broker at the 2020 Forex Expo awards. We’ve also won an award for being the broker with the Best Broker Tools, awarded by Brokercheck, so we’re perfect for more experienced traders also. We even won the Best Dealing Room award at the 2019 Forex Awards.

Why trade CFDs?

CFDs are a very popular type of product that is offered by many online brokers, but just what are the benefits of trading CFDs rather than other asset types? Now in this part of our CFD guide, let’s take a closer look at the advantages of CFD trading.

Ease of access

First off, CFDs make it easier than ever before for traders to create an account and start trading. With CAPEX, for example, you can create an account by just providing some basic personal details and verifying your account. Once that’s done, you can then begin trading thousands of instruments right away. CFDs have the advantage of making it easy for brokers to stock all types of assets on a single platform, so rather than being restricted to stocks or commodities, you can trade anything you want through a single account.

Higher leverage

With CFDs, you can trade with higher leverage than you can with other instruments. If you’re not familiar with leverage, it’s essentially where you borrow capital from a broker to make larger trades. We’ll look at leveraged CFD trading a little later on in this guide.

Fractional trading

Another big benefit of CFD trading is that it makes it very easy to invest fractionally in assets – particularly stocks. This means you can invest in expensive stocks like Amazon at a fraction of the price, so you can gain exposure to some of the biggest hitters in the market. We offer fractional share trading at CAPEX, and you can even trade fractional shares with no commission if they’re unleveraged!

No shorting restrictions

With CFDs, you can speculate on the price of assets going down as well as up. This is known as shorting. The best thing about CFDs is they make shorting much easier than it would be otherwise. For example, some markets have restrictions on shorting or require traders to borrow the instrument before selling short. With CFDs, however, you can short any asset at any time without borrowing costs.

No capital requirements for day trading

CFDs make day trading more accessible because there are no restrictions on the minimum amount of capital you need to day trade, like there is in certain markets. Some markets also restrict the number of day trades that can be made through certain accounts. With CFDs, you can day trade regardless of how much capital you have, provided you can meet the broker’s minimum requirements.

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