What are CFDs?
CFD stands for Contract for Difference. It is a popular form of derivative trading, which enables you to exchange the difference between the opening price and the closing price of a future contract. Using this trading method, you can speculate on the future movement of market prices regardless if they are rising or falling.
The basic CFD trading principal is quite simple: Select any asset and choose to go long (BUY) if you predict the market price will rise, or go short (SELL) if you predict the market price will fall. Making a profit is possible either ways, whether it\’s an up trend or a down trend movement.
As a general rule, the ask price (BUY) is always slightly higher than the bid price (SELL), while the gap between the BUY and SELL is defined as “spread”?. When opening a “BUY”? position, you buy from the market; therefore when closing it, you must sell it back to the market, and vice versa, when opening a “SELL”? position, you sell to the market; therefore, when closing it, you must buy it back from the market.
When trading CFDs, you have the benefit of using leverage (up to x200 with the Capital88 platform). Consequently, you can start your trading with a very small percentage of the total value of your trade and magnify your returns – no commissions or hidden fees involved.
The price of gold is rising, but you think it will soon drop.
You open a SELL position on gold (4 ounces) at $1,250 an ounce (the bid price).
4 x $1,250 = $5,000
The contract is leveraged on a 1:50 ratio:
$5,000 : 50 = $100
This means you need at least $100 in your trading account (initial margin) in order to open this position.
Gold then drops $20 in value. You manually close the position and earn:
$20 x 4 (ounces) = $80
Your profit is $80
You did not buy any actual gold at no point. All you did was investing on the commodity\’s market performance.
Advantages of CFD trading
Unlike traditional trading, you don\’t need to actually own any asset. As a result, this eliminates the need for any paperwork and/or contractual arrangements with any third parties.
Trading in CFDs with Capital88 is as easy as 1-2-3: Just register with your details, fund your secure trading account and start investing instantly.
Leverage enables you to gain a large exposure to any financial market with only a small amount of your capital. By doing so, you are able to increase your overall profits only because they are based on the total investment amount of the position.
Spreading your investments across different asset classes creates a well-diversified portfolio, lowers the volatility of the market with direct relation to your trades and reduces your overall risk exposure.
Exercising good money management is always possible thanks to the stop loss/take profit parameters. By automatically closing any open position in case the price either drops or rises beyond a predetermined point, you can continuously maintain your risk levels conservative.
It is possible to profit from CFD trading in both rising and falling markets. You can either open a SELL position and profit as the asset price drops or open a BUY position and profit as the asset price rises.
- Transparency and ease of execution
- Trade long (BUY) or short (SELL) with equal ease
- Up to X200 leveraged trading
- Effective risk management tools
- Available 24/5
- Transparent and secure
Why trade CFDs with Capital88?
Trading CFDs with Capital88 lets you enjoy a complete trading experience like never before.
As a well-established broker, we have the privilege to offer you much more than just cutting-edge trading technology. Unleash your full market potential with an all-inclusive access to our insightful video courses database, educational eBook library, live expert webinars, daily market news updates, professional account management and 24/7 customer support.
The benefits of Capital88:
- Ground-breaking platform
- Competitive spreads
- 100% safe & secure
- Trade on more than 1,000 assets
- Professional education center
- 24/7 dedicated support
- No commissions or hidden fees
- 1-on-1 live training sessions
Trade on more than 1,000 world-class
assets from 3 major markets