Contract for difference (CFD)

When we talk about the Forex trading people always wonder if every lots made means the exact number of worth held in our hand. My answer is absobloodylutly No.

We conduct trade with brokers instead of making currencies exchange directly with the counterparties in the market. Brokers work as a linkage between the market and us through the contract for differences(CFD). For brokers, they earn the basic trade fee agreed beforehand, which is referred to as the cost of trading.

The contract for differences (CFD) offers Forex investors an opportunity to profit from price movement without owning the underlying asset. It's quite straight that people earn the profit generated from the differences between the enter position and the exit position. The contract is similar to the betting between you and your friends at the football match. You don't have to own the football team before the bet. And brokers provide services including finding the counterparties with opposite expectations, computing profit or loss and making the delivery. Normally investors always initiate withdrawals for securing their profit. The investors have the right to withdrawal at any time and in any amount they like. However, the brokers only make the settlement only in a fixed time term base on the outcome of the CFDs.

CFD is utilized everywhere in the global market

Some advantages of CFD

1, CFDs provide higher leverage than traditional trading. It enlarges your buying power to meet higher capital requirement.

2, Many CFD brokers offer products in all the world's major markets, allowing around-the-clock access. Investors can trade CFDs on a wide range of over 4,000 worldwide markets.

Some disadvantages

1, CFD trading is fast-moving and requires close monitoring. Your margins you need to maintain; if your capital available cannot cover the loss in values, your broker closes your position in anyways without your permission.

2, the CFD industry is not highly regulated and monitored by the government. There are excellent CFD brokers, but some brokers are not trustworthy due to the background.

If you want to know the information of the brokers you are interested in please follow WikiFx up and download the APP.