A CFD (or Contract for Difference) is an agreement to exchange the change in price of a financial asset (such as stocks, indices, currencies and commodities) from the time you open the contract to the time you close the contract.

With CFDs you can capture trading opportunities from either a rise or a fall in any of the markets. Unlike traditional buy and hold stock strategies, you don’t need to wait for a rising market to place a trade. You can BUY a CFD (go long) if you a looking for the price to rise, or you can SELL a CFD (go short) if you a looking for the price to fall.

With CFD’s you can trade without having to own the underlying asset. And because you don’t need to buy the underlying asset, you can benefit from price movements with a fraction of the capital. CFDs are a leveraged product, so you trade with a margin where you only deposit a fraction of the full cost of the asset.

Full functionality CFDs are very flexible derivatives and can cover almost any financial asset. From your TD365 CFD account, you can access Australian, US, European & UK stocks, global indices, FX, cryptocurrencies and a range of commodities.

What are some of the Benefits of CFD Trading?

CFD Trading is a Leveraged Product

When you trade CFDs, you are trading using leverage. You are therefore only required to deposit a small % of the full value of the underlying instrument in order to open your desired trade. Trading using leverage is one of the biggest benefits of CFD trading, although it is important to note that trading using leverage carries risk.

At TradeDirect365, we offer a maximum leverage rate of 200:1 (0.5% margin requirement).

Go Long or Short

CFD trading allows traders to go both Long (a BUY trade) and Short (a SELL trade). This is a major advantage over traditional stock dealing where you want the value of your stock portfolio to always go up. With CFD trading you can speculate on the price movement of a financial instrument by shorting it if you think the value of it will decline.

Access Global Markets from one CFD Platform

CFD brokers like TradeDirect365 provide access to a wide range of trading instruments from the world’s financial markets so traders can trade many markets all from the one CFD platform.

Negative Balance Protection

Negative balance protection is a precautionary measure that TradeDirect365 offers in order to safeguard our clients. Negative balance protection policy ensures that our traders will not lose more money than they deposited, if their account goes into negative as a result of their trading activity. This means that if you choose to trade with TradeDirect365, you won’t owe money to the firm because of a bad trading decision.

Most times brokers have safeguards available such as margin calls, but, in the past, these safeguards didn’t work well when large unexpected market movements took place. The speed of the movement may move the price beyond your margin call close out level resulting to larger than expected capital loss.

Array of Trading Opportunities

CFD trading provides traders with a range of trading opportunities, including stocks, currencies, commodities, cryptocurrencies and indices. For a complete list of the products we offer, please view our Market Information Sheet.

Want to know more? Read our 5 Things You Need to Know Before You Start CFD Trading

What are some of the Risks of CFD Trading?

Trading CFDs provides many benefits, but also carries a number of risks.

Leverage

When you trade CFDs, you are trading using leverage. Leveraging presents the opportunity for potential gains to be increased which also increases the risk of potential losses.
TradeDirect365 offers a number of risk management tools to help protect yourself from losses if the markets move against you.
TradeDirect365 also offers negative balance protection to ensure your account will not fall into a negative position.

Market Volatility

Market volatility is the speed at which prices change.  CFDs provide the benefit of trading a wide range of markets, some of which are more volatile than others.  Some markets experience high volatility in prices, particularly in times of important announcement or events.  It is important to understand the volatility of the market your wish to trade in and ensure your position size reflects the risk you wish to take.

Want to know more about CFD Trading?

If you’re new to CFD trading or would simply like to know more, then you should check out our Secrets of CFD Trading section.