HOW TO TRADE CFDs PROFITABLY
A trader's guide to successful CFD trading
by
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CFDs - WHAT THEY ARE AND HOW THEY WORK A Contract for Difference (a CFD) is an agreement to exchange (through a contract) the price difference of an investment between the time of buying, or selling, and the time of closing the contract. A CFD trader can either buy the CFD, thus looking to make a profit if the asset rises, or sell, if a negative view is held and acted upon. The fundamental purpose of CFDs is to allow investors to trade a share, or many other assets, without actually owning that asset, and also, importantly, being able to do so at a low cost. There is a wide range of assets that can be CFD traded. CFDs were introduced to the UK in the late 1990’s, and since then have become increasingly popular to account now, in shares, for about a third of all London Stock Exchange volumes. This book will concentrate on CFDs relative to UK shares. The theories expressed apply similarly to overseas shares (for which CFDs are much easier to trade than buying the shares outright) and also a range of commodities, Indicies and currencies.
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CFD stands for Contracts for Difference. As such, they are a crisp and racy way to trade shares and other assets. Put another way again, they are share trading—with wheels on! Profits can be gained with CFD trading faster and with less capital than standard trading, but losses occur in equal measure if the wrong entry decisions and timing are made. It can be exciting, exhilarating—and dangerous. Whether you are new to this way of trading or already indulging, there are skills to be learned, strategies to be understood, and pitfalls to avoid, to gain the ongoing profits that thorough knowledge and application can provide CFDs are currently available in the United Kingdom, the Netherlands, Poland, Portugal, Switzerland, Italy, Singapore, South Africa, Australia, Canada, New Zealand, Sweden, Norway, France, Ireland, Japan, and Spain. They are not permitted in USA due to restrictions by the US Securities and Exchange Commission. US citizens can trade UK shares through London Broker houses.