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CFDs – The Next Level of Trading Financial Instruments





Trade CFDs with Xtrade

CFD trading is a form of derivative trading. That’s a fancy word that simply means the price of CFDs are derived from the underlying financial instruments being traded. Typically, when you trade Shares, Indices, Commodities, Forex, Bonds, or ETFs, the way that you generate profits is when prices rise over time. But with CFD trading, everything is different – in a good way. CFD trading at Xtrade.net allows you to buy & sell Contracts for Difference (CFDs) related to the underlying financial instruments you are trading.

CFDs can be traded in rising or falling markets. Unlike traditional trades where price appreciation determines profitability, you can generate favourable returns in bullish or bearish markets. At Xtrade.net, we provide you with a full suite of financial instruments to trade in a CFD format. Plus, we offer generous Leverage and low Margin for trading CFDs online. Traders are able to pick assets from a wide range of financial instruments. Examples of Bonds, Commodities, Forex, ETFs, Shares, and Indices include the following:



  • Bonds – US 5Y T-Note, 10Y Euro Bund, Gilt Long Government.
  • Commodities – Brent Crude Oil, Natural Gas, Sugar, Gold/EUR, Cotton.
  • Forex – EUR/GBP, USD/JPY, EUR/CAD, GBP/NZD, EUR/DKK, GBP/TRY.
  • ETFs – USO-Oil Fund, MSCI Brazil, UltraShort S&P500, Direxion Financial Bear.
  • Shares – Las Vegas Sands, Visa, Ferrari, Chevron, Boeing, ExxonMobil, Coca Cola.
  • Indices – USA 500, NASDAQ, Russell 2000, Hong Kong 50, France 40, Europe 50.


How Does CFD Trading Work?





Recall that CFDs are derivative products. The price of the CFD is derived from the asset being traded. At Xtrade.net, we offer plenty of CFDs for you to trade. A word of caution up front: CFDs are high-risk trades and not suited to all types of traders. It’s always a good idea to read relevant material about the financial instruments being traded – both technical and fundamental analysis. We provide a comprehensive Education section, with video tutorials on CFDs, trading courses, a blog and a full glossary of trading terms.

There are two possible price movements that can result in CFD profits – rising prices or falling prices. Of course, if there is no price movement (static prices) nothing occurs. As a trader, you can make an educated assessment about prices. If you are bullish and you expect prices to rise, you will buy the CFD. If you are bearish and you expect prices to fall, you will sell the CFD. When you are bullish, you will GO LONG and when you are bearish, you will GO SHORT. Your profits or losses are determined by the accuracy of your forecast. You can also learn about bonds.

First, let’s assume that you are bullish about the USO-Oil Fund ETF:

  • If the price is now $57.53 and you expect the price to rise, then your gross profits are determined by the amount the price rises X number of CFD ETFs traded. After the spread, maintenance margin, fees and/or commissions have been deducted, you can calculate your net profit. In this case, prices must rise for profits to be generated.

Now, let’s assume that you are bearish about the USO-Oil Fund ETF:

  • If the price is now $57.53 and you expect the price to fall, then your gross profits are determined by the amount the price falls X number of CFD ETFs traded. After the spread, maintenance margin, fees and/or commissions have been deducted, you can calculate your net profit. In this case, prices must fall for profits to be generated.

If an unfavourable outcome results, the size of losses is directly related to the size of price movement against you.



Margin and Leverage with CFD Trading

Every financial instrument available at Xtrade.net is offered with leverage. That means, only a small amount of capital is required to open a trade. Leverage magnifies the ‘buying power’ of your capital. This can increase your profits, but it can also magnify your losses. Trade with caution.

Take a look at the CFDs list [https://www.xtrade.net/en/financial-instruments/] of financial instruments available at Xtrade.net. Each category of CFDs is offered with specific leverage. For example, Brent Oil has leverage of 200:1. That means that every US$1 has US$200 trading power. Leverage amounts will vary within asset categories, and across asset categories.

Margin is simply the reciprocal of the leverage amount. So, leverage of 50:1 is essentially 1/50 margin, or 2% of your capital. Leverage of 100:1 is 1/100 margin or 1% of your capital. The margin amount indicates how much of your capital is needed to open a CFD trade.



Pros & Cons of CFD Trading

Pros

  • Profit in rising or falling markets
  • Wide exposure to the financial markets
  • Avoid the pitfalls of asset concentration
  • Minimal capital maximum diversification
  • CFDs are not subject to inflation-related risk
  • Hedge against investments in traditional assets

Cons

  • No ownership of the underlying instruments
  • Traders are liable for the full value of the trade
  • CFDs are high-risk and most traders lose money
  • Margin calls may be required to keep trades open

CFD trading certainly has its merits. But traders must also be aware of the risks. You can trade many financial instruments using CFDs. Practice on a demo account before you trade for real money.

It takes less than 2 minutes to open an account with Xtrade. Use Credit Card, Skrill or Bank Transfer to fund your account.

List of CFDs

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Trading CFDs involves significant risk of loss. Trading FX/CFDs involves a significant level of risk and you may lose all of your invested capital. Please ensure that you understand the risks involved.