There are lots of approaches people use these days to try and make money from the financial markets, and lots of reasons why they do it. Financial trading can be a fun and interesting thing to do that can help you learn some useful knowledge and skills, and of course, you can also make some extra money by doing it. With online and mobile platforms and a wealth of online resources that can help you learn to trade and gain insight into the markets you are active in, trading is now something that is accessible to people from all walks of life, and there are some styles of trading that can work well for you even if you don’t have a lot of capital to use at the start.
CFD trading is one such style, which is becoming very popular with modern amateur traders. Here, we look at what CFD trading involves, and how you can get started if you decide it is something you want to try.
What is CFD Trading
CFD stands for ‘contract for difference’. What this means is that rather than trade assets like stocks, gold, or foreign currencies, you instead trade contracts on predictions of what will happen in a given market, for instance say that the price of the pound against the dollar will go up by a certain range within a certain timeframe.
Why People Choose CFD Trading Over Other Styles of Trading
Many people prefer CFD trading to trying to profit by investing in a given thing and selling it at a higher price, for several reasons. Firstly, you can profit even when the markets are doing badly. It actually makes no difference with CFDs whether the stock market or a given currency is doing well, only that it is behaving in the same way you predicted. Secondly, you can make more money from one trade, so for people who don’t have much capital to start trading with, it can offer a more exciting prospect. Another good thing about CFD trading is that on the same platform, you can take out CFDs on all different things, so if you can’t decide if stocks, commodities or currencies are most interesting to you, with CFDs you can explore them all.
What Do You Need to Get Started?
From a practical perspective, all you need to begin CFD day trading is some money that you are happy to use for trading, and an account on a good CFD trading platform. This is easy to set up, and will give you the ability to start trading. However, it is a bad idea to just plunge in without any research or a trading strategy, so before you begin read up on these things and spend some time becoming aware of the current events affecting the markets, and which direction experts predict they will move. Understanding analysis and being able to do your own is the key to good trading.
Trading of any kind can involve a bit of a learning curve, however once you understand what you are doing, it can be both fascinating and rewarding. Good luck!
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.