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6 Important Steps in CFD Trading
With the capability of CFD trading to use leverage, trade on falling markets and access numerous instruments, some even trading throughout 24 hours of the day, investors are preferring to get the benefits of its versatility as part of their portfolio.
Here are steps of how to trade CFDs:
1. Select a market
First, you should choose a market to trade on. Study a good website where you can find technical and fundamental analysis to get inspiration for trading. There are thousands of markets including currencies, shares, commodities, indices, bonds and interest rates, offering you immediate exposure to main global markets such as Asia, Europe, UK, US, New Zealand and Australia.
2. Buy or sell
You should know the current price. There are two prices in the CFD market – 1st one is sell price (bid) and the other is buy price (offer). Spread is the difference between these two. Click ‘sell’ if you think that market is falling in value and ‘buy’ if you think prices will increase.
3. Choose your trade size
1 CFD is equivalent to 1 physical share in share trading, while in the trade of commodities, FX, interest rates or bonds, 1 CFD varies in value based on the instrument. Select how many CFDs you would like to trade. By taking a look at the instrument’s market information sheets, you can see which number you are trading on. CFDs are traded in the market’s base currency.
4. Use a stop loss
You should decide your risk management strategy before you trade CFD. A stop loss is a feature with which you can close your position out at a price if it changes too far against you. This will minimize your loss.
5. Keep an eye and close your trade
After placing your trade, you will immediately see your profit/loss update at the top of the screen. By clicking the ‘close trade’ button, you can exit your trade. Using top trading platforms will provide easy access, from pretty much every device you’d prefer, to track market prices, your profits and losses and more.
6. Closing a trade
When you want to close a trade, you just have to do opposite of opening trade or choose the ‘close position’ option in the positions window. When you do this, your net open profit and loss will be reflected in your account balance in real time. But this will be done if you’ve not triggered your limit order or stop loss.
Learn and practice these steps and enjoy a profitable CFD trading.
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