What is CFD?

CFD was originally developed in the early 1990s in London as a type of equity swap that was traded on margin. The term CFD stands for Contract For Difference, this is a contract to exchange the difference in value of a financial instrument between the time at which the contract is opened and the time it is closed. What this means is that, you select the market you want to trade but rather than making the full physical purchase/sale, you buy a CFD instead. This contract will replicate the profit and loss of your intended purchase/sale.

Introduction to CFD

One clear advantage of CFD trading is that traders are not limited to establishing positions in only one type of economic environment, the ability to trade in both rising and falling markets adds flexibility to your CFD trading strategy. It allows you to forecast price movements that coincide with the underlying fundamentals, making it possible to profit in both bull and bear markets.

CFD trading is a preferred alternative to traditional shares trading, giving you a greater degree of leverage on your investment capital. When you trade CFDs, you do not have to put up the full value of the shares you are trading. Instead you pay a deposit or margin to cover any potential loss on the position, which is typically a fraction of the full contract value. For contracts that do not have an expiry date, you decide exactly when you want to close your position to realise your profit. The ability to go short or long with CFDs also make them a popular option for traders who want to hedge against an existing investment portfolio.

Although originally devised for equity trading, CFDs are now also commonly used to trade indices, forex, energies, metals, commodities and more. A variety of trade sizes is available for CFDs, which can be used for various trading styles or types of investment account. Due to the large scale of flexibility on CFD trading, it is rapidly gaining popularity across the entire financial market.

PROFITABLE IN RISING AND FALLING MARKETS

Option to Long and Short the Markets allows us to profit both ways

HEDGING

For Cropean, hedging refers to the practice of taking a position to offset any risks by assuming a position in an opposing investment. We setup our CFDs to lock in winning positions of our trades.