Where Can You Find CFDs Trading Examples
Spread Betting and CFDs are trading products, based on the financial markets- in particular, how the markets react to changing market conditions, what direction they move to and how different trading participants interpret a market’s movements. Spread Betting and CFDs are not only commonly associated to currencies and exchange rates. Commonly associated to currencies and exchange rates, spread betting and CFDs deals with other fields also. Basically you can trade whatever market is quoted on an exchange and is sufficiently liquid to support trading. If mobile phones are your thing, you can even trade using a mobile phone. iPhones and Android applications are quite easy now for entering the spread betting and CFDs marketplace. Can bet on the rise or the fall of a particular market and the basic principle is also quite simple to understand. It is a straightforward directional bet that rewards you more; the more you are correct, you win, if the market goes more in the direction you indicate. However, as well as spread bets there are CFDs, which are very much like spread betting but are preferred by professional players and hedge funds.
Contracts for differences can be described as deals between two parties, usually referred to as the buyer and the seller. If you are the buyer, you buy a contract where-through you commit to pay the seller the difference between the current value of the goods and the value at the time you agreed the contract. The seller pays you through the contract, being a buyer would be to get a negative difference. You want the opposite, as a seller. What are the advantages of contracts for differences? Well, quite simply it allows you to leverage your limit capital to trade in bigger positions. There is no minimum dealing size, you can profit from both rising as well as falling markets and with a small amount of money you risk, can get exposure to a much bigger market position.
You may understand this concept better with a few CFDs trading examples; here is a share trade example. The share price of Nokia is $150.45, believing that this price will increase in the coming weeks, take a look at your provider’s bid and offer. 100 CFDs are purchased at the offer value for $15,050, as the bid is $150.40 and the offer is $150.5. As the CFD provider has a margin requirement, assuming that Nokia has 3%, which means $451.5, provider will also charge a little commission. $15.05 is charged as a dealing fee, as 0.1% is for our example. Nokia share price has risen by $7.55, due to one reason or another. Share price of Nokia has risen by $7.55, due to one reason or another. Now your provider has different values, $157.95 for bid and $158.05 for offer. Nokia Your net profit from this whole transaction is of $278.45, if you sell your Nokia CFDs at the bid price, which is totally $15,795. If you had purchased 1000 Nokia CFDs, what would happen? You got the point.
Contracts for differences are seen by many people as a real business and some of them actually make a living from trading. You really need to know what you are doing and not over-leverage yourself as otherwise you could easily get wiped out, as all traders are not successful. Patience and a trading plan based on strict rules are needed in this process.
Know more about contracts for differences and CFDs trading examples.
Processing your request, Please wait....
