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CFD Meaning: Definition and Basics for beginners Mastering CFD Trading: Understanding the Pros and Cons, Tips for Safe Trading, and More with CAPEX.com

CFD, short for contract for difference, is a popular form of financial derivatives in which two parties speculate on an asset’s price movement and invest based on that speculation. Here at CAPEX, we offer the best CFD trading experience for all traders.

Continue reading to answer ‘what is a CFD’ in detail, and figure out whether it’s the right instrument for you.

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Roy Connor
Author:
Roy Connor
Last Updated on:
05/12/2024
Topic:
Trading
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Trade CFDs on more than 2,100 instruments at CAPEX

Diversifying your trades is a great way to gain market exposure without risking all of your money at once. So if one market is going down, you have good chances of recovering that loss through another investment that may be going well. Here at CAPEX, we offer CFD trading on over 2,100 assets, so you’ll never run out of trading opportunities. Whether you’re interested in commodities, forex, ETFs, indices, bonds, blends, shares, or crypto, you can invest through CAPEX with the lowest trading costs.

Trade CFDs on the smoothest trading platform

Beginning your trading journey is an overwhelming experience to begin with, so trading on a platform that isn’t easy to understand or use can lead to a poor trading experience. Hence, it’s essential that you focus on trading with a user-friendly and intuitive trading platform.

Here at CAPEX, we offer our traders two unique trading platforms – CAPEX WebTrader and MetaTrader 5 (MT5). Both our platforms are recognized for being simple to use, with a user-friendly interface and a high level of intuitiveness. The first thing you’ll notice while trading with CAPEX is that everything on our platform is neatly aligned and easily accessible.

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What is a CFD? – CFD trading meaning & explanation

A CFD or contract for difference is a contract between a buyer and a seller, where they invest in an asset’s price rather than the asset itself. CFDs can be traded on several financial instruments, including stocks, indices, ETFs, commodities, bonds, blends, forex, and crypto.

CFDs and leverage

The best part about trading CFDs is that they can be traded with leverage. So, suppose you have 100$, and the leverage offered by your broker is 1:10. This means for every 1$ that you have, the company will invest 10$ as a loan to you, and you get a market exposure of 1000$. Leverage is a great way to expand your market exposure with limited funds, and as a result, you get multiplied returns. Of course, that also means a higher exposure to losses, so be sure to comprehend CFDs and leverage before investing.

Here at CAPEX, we allow traders to trade CFDs in a secure environment with the help of advanced tools and features, plus a user-friendly trading platform that includes a CFD demo trading account feature.

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Experience a new level of trading with the right support when you need it. Sign up for a free account and trade smart with CAPEX.com.

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Pros and cons of trading CFDs

Pros of trading CFDs

  • You can earn when the market is expected to go well by buying an open position, or you can profit when the market is expected to fall by opening a position. So, it’s a win-win situation wherever the market is headed.
  • CFD contracts can be renewed, so there’s no fixed expiration date.
  • CFD trades offer greater leverage, which can multiply profits and allow you to gain greater market exposure than you could otherwise.
  •  The trading costs for CFDs are lower compared to other instruments.
  • Since CFDs can be traded on numerous assets, the opportunities with CFDs are endless.

Cons of trading CFDs

  • While greater leverage means multiplied profits, if the trade does not go well, it can lead you to lose more than you invested.
  • When trading CFDs, you don’t own the underlying asset.

Trading with a secure broker like CAPEX.com can help you better manage the risk of losing money with the help of limit orders, learning tools and expert trading support.

How to trade CFDs securely

Although CFDs can be high-risk investments, there are several ways that you can trade them securely. Here are a few CFD trading tips:

Carry out proper research

Knowledge is power, especially when it comes to investing. Just knowing the CFD meaning is not enough. A trader must know about the markets they’re investing in so they can judge market directions better and increase their chances of trading profitably. You can learn about the factors that affect a specific market, strategies that can be applied while trading, and study market patterns & analytics before investing. In fact, it’s always best to start your trading journey in markets that you’re already familiar with.

Practice on a demo account

Practice makes perfect, especially when it comes to trading CFDs. Signing up with a demo trading account can be beneficial in a number of ways. You get a good idea of where you stand in terms of trading knowledge and experience, you begin to understand the risks involved with trading a given instrument, and you get the opportunity to polish your trading skills. Once you’re confident that you can trade profitable, you can shift to an actual trading platform and begin your trading journey.

Diversify your trades

Never put all of your eggs in a single basket. In simpler words, don’t invest all your money in a single asset or single trade. The best way to begin your trading journey is by investing small amounts of money in various markets. Diversifying your trades is a great way to avoid extreme losses and increase market exposure. In fact, it could help you build your trading portfolio and give you a better insight into markets you’d prefer trading in over others.

Learn trading strategies

When it comes to trading financial instruments, strategies are your best friend. Having a few effective online trading strategies up your sleeve can make all the difference. For instance, the 1% rule states that you should never invest more than 1% of your total capital in a single trade. Or there’s the pull-back strategy that promotes the idea of waiting for the value of an asset to pull down during a trend and then investing at a better entry price. You can also learn the hedging strategy, which can be extremely effective while trading CFDs.

Choose the best trading platform

Never undermine the importance of an easy-to-use, secure, and trader-oriented platform because it plays an essential role in shaping your experience as a trader. Being known as the best CFD broker out there, at CAPEX.com, we provide our traders with a user-friendly trading platform that has a good range of tools integrated to support traders throughout their investment journey.

Learn CFD trading with the help of effective learning tools and features

Ongoing learning is essential if you want to become an expert trader. Here at CAPEX, we offer several learning tools and features to ensure our traders prosper in their trading journeys. For instance, we offer CAPEX Academy, an online trading school for traders to learn the basics of trading through videos. We also offer a trading dictionary and expert trading blog so traders can understand important terminologies and remain up-to-date with ongoing market trends.

What to look for in the best CFD platform and how we offer that

Choosing the right trading platform for your trading journey can be challenging. Here’s a list of things you can look for in the best CFD trading platform, along with a detailed overview of how we, at CAPEX, offer each of these features or tools.

License and regulation

The first sign of a broker being secure is their license to practice under a tier-1 financial authority. CAPEX is licensed and regulated by CySEC (Cyprus Securities and Exchange Commission), which is a recognized tier-1 financial authority. We are also registered with numerous financial institutions across the world, which speaks volumes for the level of security we offer.

Smooth & intuitive trading platform

Having a smooth trading platform that is easy to use makes trading a lot easier. Here at CAPEX, we offer traders two trading platforms – The CAPEX WebTrader & MT5 Trader, both of which are user-friendly in all aspects. Our trading platforms are designed to suit all traders as they’ve got a simple interface and are easy to use, but at the same time, our trading platforms have a number of integrated tools to support traders with their investments.

Excellent customer support

It’s entirely normal to have questions and queries as you embark on your investment journey, which is why it’s mandatory to choose a broker that offers available customer support. Here at CAPEX, we have an excellent team of customer support advisors that can be reached through email, phone, and live chat. Our customer support services are available seven days a week. We also have an elaborative FAQs page on our website, where we’ve answered several queries in an elaborative manner.

Learning tools and features

Learning is an extremely important aspect of trading. The more you know, the better you trade. So, when it comes to choosing a broker, you have to ensure that they value ongoing learning and offer relevant tools. We at CAPEX have an online learning school CAPEX Academy, where traders can learn CFD trading meaning & how to trade through easy-to-understand video content. We also have a trading dictionary available on our site, along with access to an expert blog where traders can remain up-to-date with ongoing market trends.

 

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How to start your CFD trading journey today – Sign up with CAPEX.com

Who knew signing up with the best online CFD broker could be so simple? All you have to do is:

  1. Hop on to our website and click on our sign up option
  2. Enter a few basic details along with your email address and click on sign up.
  3. You’ll be redirected to our trading platform, where you can opt to complete your account registration process.
  4. Enter a few more details, including your salary and taxation info.
  5. Once you’ve added all the details, you’ll finally have to take a quick assessment so that we can judge your trading knowledge and skill level to ensure you’re trading within your capacity.

Once we’ve received your details, your account will be verified and ready to use in no time. We highly recommend that traders give our demo trading account a try beforehand, as it’ll allow them to learn more about the platform and CFD trading altogether.

Final thoughts – Learn more about CFDs with CAPEX

A contract for difference is a great way to capitalize on your funds as it allows you to gain greater market exposure with fewer investments. Plus, CFDs can be traded on thousands of assets, which make it a great option for those who’d like to diversify their trades and benefit from endless trading opportunities.

Although it’s no secret that CFDs can be extremely risky instruments, especially for traders, there are a number of ways to reduce the risk and increase the chances of making profitable trades. If you’re interested in trading CFDs with a secure broker that offers over 2100 tradable instruments, learning tools, excellent customer support, and a top-notch trading platform, then sign up with CAPEX today.

What is a CFD – FAQ

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HIGH RISK INVESTMENT WARNING: Trading CFDs is highly speculative, involves significant risk of loss and is not suitable for all investors. Before trading, you are strongly advised to read and ensure that you understand the relevant risk disclosures and warnings. There is a substantial risk that you may lose all of your initial investment. We advise you to consider whether trading leveraged products is appropriate for you in light of your own personal circumstances. We recommend that you ensure you fully understand all risks involved before trading. Trading through an online platform carries additional risks. Please refer to our Legal documents section here.


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