CFD Trading

Most people who use CFDs are short-term traders or day traders, although CFDs can be used in buy-and-hold strategies if you use no leverage. In order to find more success in trading, you need to know how to use technical analysis, including technical trading indicators. With most CFD providers you must also pay a separate commission charge when you trade share CFDs. Leveraged trading is sometimes referred to as ‘trading on margin’ because the funds required to open and maintain a position – the ‘margin’ – represent only a fraction of its total size. Some of the criticism surrounding CFD trading is connected with the CFD brokers' unwillingness to inform their users about the psychology involved in this kind of high-risk trading. Factors such as the fear of losing that translates into neutral and even losing positions[41] become a reality when the users change from a demonstration account to the real one.

The net difference between the purchase price and the sale price are netted together. The net difference representing the gain from the trades is settled through the investor’s brokerage account. CFD trading enables you to speculate on price movements in either direction. So while you can mimic a traditional trade that profits as a market rise in price, you can also open a CFD position that will profit as the underlying market decreases in price.

Which broker is best for CFD trading?

Don’t forget – you can always try out your CFD trading preferences using a Demo account to ensure you’re comfortable with your chosen instrument before you enter the live markets. How much you have to pay for a trade in spreads, commissions and other trading costs is a key broker selection criteria. We calculated a benchmark fee for the most important CFD trading costs, which you can see in the table below. This is the total of how much you have to pay in spreads, commissions and other costs for a trade in each asset class. CFD trading enables you to sell (short) an instrument if you believe it will fall in value, with the aim of profiting from the predicted downward price move.

CFD Trading

One of the benefits of CFD trading is that you can speculate on the asset’s price movements in either direction. You buy or sell a contract depending on whether you believe the asset’s price will go up or down, opening a long or a short trade, accordingly. A CFD trade will show a loss equal to the size of the spread at the time of the transaction.


Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

  • Check out what types of CFDs you can trade at the best CFD brokers and CFD trading platforms.
  • Although it can help increase your profit potential if the markets move in your favor, it can also magnify your losses if the market goes against you.
  • The change in the value of your position reflects movements in the underlying market.
  • With the growing popularity of the product, several other UK and European institutions began to offer CFDs.
  • Most people lose money when trading CFDs because it’s advanced and high-risk.
  • Limit orders, meanwhile, do the opposite, closing your position when the market moves a specified distance in your favor.

Certain markets require minimum amounts of capital to day trade or place limits on the number of day trades that can be made within certain accounts. The CFD market is not bound by these restrictions, and all account holders can day trade if they wish. Accounts can often be opened for as little as $100, although $1,000 to $5,000 is recommended deposit for proper risk and money management.

Why Trade CFDs with AvaTrade?

For example, if you expect the price of gold to increase you may want to open a position with a CFD on gold. Imagine the quoted price is $1,200/$1,205 (this is the bid/ask spread). The size of the position taken (the contract value) is illustrated below. If you think the price of an asset will rise, you would open a long (buy) position, profiting if the asset price rises in line with your expectations.

CFD Trading

There are lots of research tools available in our platform to help you do just that – including news and analysis pieces, technical indicators, alerts and more. But to take full advantage of the versatility of CFDs, you’ll want to ensure you understand how to trade them correctly. In order to remove final day volatility, at AxiTrader we switch from using the front month contract into the second month’s contract one trading day prior to the exchange expiry.