Traders, who have recently joined the market, usually wonder how to improve their performance and earn money from CFD trading. The first thing you have to do is to learn everything about CFDs. Also it is worth learning about MACD indicator. Start with checking out this brief but detailed guide. It will help you to understand the main principles of CFD trading.

Simply About CFD

What is CFD? CFD is short for contract for difference. The name indicates the specifics of its trading. A trader speculates the difference in the price of one particular asset on its enter and exit. The trader decides when to stop trading and checks the difference. Traders neither own any assets nor pay the whole price for this asset.

CFDs are incredibly sensitive to any movements of assets on the market. Contracts are made between sellers and buyers. They are trying to predict the best possible outcome and gain the money. A broker is a middleman between them. Brokers usually set the prices of the assets based on the trends of the market. The goals of each party are the following:

• The buyer wants to make a profit from the higher prices of the assets at the end of trading;

• The seller hopes that the price of the asset is higher in the beginning than in the end;

• The broker sets the price, helps to find the market or the asset, and provides the best tools for traders.

Principles of CFD trading

There are numerous specifics of CFDs trading that make it both different and similar to traditional trading. You have to learn them before you go to a broker. The most crucial of them are:

• You don’t need to buy an asset you want to speculate. You still have to invest some money. However, unlike the traditional way of trading, you don’t become the owner of the product;

• You need a broker. A good broker provides you with the best markets and the tools you need for your work. Many famous brokers can help you learn how to trade;

• Choose whether you want to go short or long. Going short means you open the sell position on the asset after claiming that it will lose the price. You expect the fall of the prices. Going long allows you to speculate that the price will rise, and you open the buy position. The higher the price grows, the more money you receive.

Basics of Trading for CFDs

If you want to start trading, don’t wait for the perfect timing. All you need is to start. The market will always be one of the most unstable and constantly changing places. You can learn it and grow inside it. To succeed in this, follow the next steps.

1. Find the broker that suits you

Don’t make an agreement with a company you don’t trust or have doubts about. If you are new to this market, you probably don’t know any brokers. That’s ok. Check out the lists of the most trustable brokers and examine the reviews of other traders. Keep in mind that professional brokers provide you with secure markets, offer tools, and help to learn everything you need about the CFDs. A good broker has to support you in your decisions, provide recommendations, and help to gain experience. Some companies take the payment for their services right after you register there; others ask for a share of the profit.

2. Learn the basics

If you want to become successful and earn money from CFDs markets, you have to understand how everything works there and which tools are the best to use for a particular situation. There is an expiry period in the contract, and you have to be careful with venturing. If you decide to dig deeper into commodities, read the news about the asset you are trading. Learn how to make fundamental and technical analyses of the market.

3. Create your own strategy

Don’t rush with it. Use some popular strategies on the market before you develop something that suits you the most. To do this, learn the subject, examine the market, and do research on the most successful strategies in the history of trading. Brokers usually provide you with enough materials to do this. Create a strategy for a buyer and a seller, no matter which role you currently prefer: you will need both of them. 

Try the intraday strategy, in which you have to act in a short time. If you like to observe the market, this strategy is profitable. Day trading is for a longer period of time. To do this, make a plan and decide upon a budget you can spend. You may also go with swing trading, which is speculating on the price changes of the asset during a day or week. The leverage of margin trading is the most common strategy. Your broker has to loan the trading funds to you.

4. Start the process

After everything is settled down, all you have to do is open the position and wait. Make the market analysis even after you do it. If you can pick the specific topic in the news, like changes in the price of gold, and receive push-up notifications if something new happens, sign up for them. With the adrenaline rush, try to keep your head cold. You need to be able to use your strategy and not get carried away too fast.

Things to Consider Before Trading

Once you find the best strategy and broker, you will feel calmer and more confident. However, you still need to keep numerous things in mind. Pay attention to the following aspects:

• Security. Think about the security that the broker provides you. Is your money safe?

• Analysis tools must be easy-to-learn and helpful;

• Learn the margin requirements before you start trading;

• Find out the fees or commissions brokers want from you.

Becoming Professional CFD Trader

There is nothing impossible for traders who want to earn money from CFDs speculation. With enough time and desire to become successful, you will learn the basics in no time. Trading CFDs might be challenging since you need to use your analytic mind 100 percent, but it is equally rewarding.