How do cfds actually work?

[Lisa]

Sorry i don't think i explained myself correctly , thank you i kinda understand now .

But i still would like to know reports etc which can help me.

[nadine]

No problem, if you have questions don't hesitate to ask.

Like I told you earlier, reports depend on the comodity you want to trade but any major economic report from any country which has a strong global foorprint is likely to influence the price of commodities. Having said that, once you read the report it is already too late anyway.

[luckystrike]

Contracts For Differences allow gains from changes in the prices of shares. It can be described as an arrangement made in a futures contract where the differences in settlement are usually made through cash payments, as opposed to the delivery of tangible goods or securities. Contracts For Differences (aka as CFDs) are an effective speculative tool for trading diverse markets such as forex, indices, shares and commodities.

For example you can buy a CFD on a share that is $10 and if its price rises up to $10.50, then your profit will be represented by the change in price. So if you bought 1000 CFDs of that stock, then your profit would amount $500, minus dealing costs.

I think you should find this helpful to understand CFDs -:

Contracts for Difference Questions and Answers

[forexhitman]

your trading a vertual markt aint you ?

[SJCFDs]

your trading a vertual markt aint you ?

I'm not sure if i would use the word "virtual" as such, but yes - there is no physical exchange where CFDs are traded.

They are a contract between you and your individual broker.

But the CFDs track the prices of physical shares traded on official exchanges - so in that sense they are not "virtual" - they are derived from physical prices.

[bobneedham]

I only engage in forex trading, can you educate me more about CFD's? Thanks!

[SJCFDs]

I only engage in forex trading, can you educate me more about CFD's? Thanks!

Hi Bob,

CFD stands for "contract for difference" - in it's simplest form a CFD is a "contract" opened between you and your broker, to pay or recieve the "difference" in value between the time of opening the contract and closing the contract. The contract can be entered or exited at any time, and there is no set time frame for which you have to hold it.

So CFDs are concerned only with the MOVEMENT of markets - the difference in value will be determined by the size and direction of the move in the underlying over the duration of the contract.

The "underlying" is the stock/future/commodity/FX pair from which the CFD price is derived, i.e. which market the CFD is tracking. The word "derived" can be slightly missleading as in reality the vast majority of CFDs are identical to the price of the underlying, sometimes with a slightly larger spread (but only sometimes).

CFDs allow you to trade on leverage. This means that you need only stump up a fraction of the cost of the full value of the underlying position.

This is basically CFDs in their simplest form.

The differences between CFDs come when they track different underlying market types - i.e. FX vs commdities vs equities etc

Theoretically ANYTHING with an official price that moves can be packaged into a CFD.

In terms of P&L per tick/pip movement you can open a CFD position in an FX pair that exactly represents holding a physical FX position.

As you are an FX trader ,it may well be beneficial to first compare CFDs vs FX. It will be much more familiar to you that way - and you can then expand that knowledge to other asset classes.

If there is any specific questions you have, please ask and will answer them as best I can.

[praetserge]

CFD trading is very popular in the UK and Australia as you can trade on margin (thus you don't need a lot of money as you borrow most of the money from your broker) and in the UK you don't have to pay stamp duty when dealing with shares.
They also provide a wide range of markets as you can trade shares, indices, forex, interest rates and more.
Overall CFD Trading is very similar to financial spread betting as you get the difference between buying and selling price (if you go long) and you don't actually hold the underlying instrument.

[irineliul]

Using Forex EA's (Expert Advisors) or Forex Robots, as they are often called, can be very advantageous to a Forex trader.

This is especially true for Forex beginners, who are confused by all the charts and indicators (who was Fibonacci, anyway?). The solution for these newcomers to the Forex world is to use Forex Robot or EAs, as they are sometimes called.

ACM Forex Expert Advisors - Let the Experts Decide