{"id":4097,"date":"2020-04-09T07:31:25","date_gmt":"2020-04-09T07:31:25","guid":{"rendered":"https:\/\/trade-malaysia-option.com\/cfd-trading-2020-tutorial-dan-broker\/"},"modified":"2023-02-09T12:24:51","modified_gmt":"2023-02-09T12:24:51","slug":"cfd-trading-2020-tutorial-dan-broker","status":"publish","type":"post","link":"https:\/\/trade-malaysia-option.com\/en\/cfd-trading-2020-tutorial-dan-broker\/","title":{"rendered":"CFD Trading 2020 \u2013 Tutorial dan Broker"},"content":{"rendered":"

Day trading with CFDs is a popular strategy.\u00a0The leverage and trading costs of CFDs make them the choice for active traders and intraday trading.\u00a0This page provides an introductory guide, plus tips and strategies for using CFDs.\u00a0We also list the best CFD brokers in 2020.<\/span><\/p>\n

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What are CFDs?<\/span><\/h2>\n

A CFD is a contract between two parties.\u00a0They agree to pay the difference between the opening price and the closing price of a particular market or asset.\u00a0Therefore, it is a way to speculate on price movements, without owning the actual asset.<\/span><\/p>\n

The performance of CFDs reflects the underlying assets.\u00a0Profits and losses are established when the value of the underlying asset changes following the opening price position.<\/span><\/p>\n

When trading CFDs with a broker, you do not own the assets being traded.\u00a0You are speculating on price movements, up or down.<\/span><\/p>\n

Examples of CFDs<\/span><\/strong><\/p>\n

Let’s use an example.\u00a0Let’s say you select a stock with an asking price of $25 and you open a CFD for the value of 100 shares.<\/span><\/p>\n

If buying shares traditionally, the cost is $2,500.\u00a0There may also be commissions or trading costs.<\/span><\/p>\n

However, CFD brokers often require only a 5% margin.\u00a0This will allow you to enter the same trade but with only $125. (The actual level of leverage or margin will vary).\u00a0This makes it an attractive hunting ground for intraday traders.\u00a0The risk-to-reward ratio increases, making short-term trading more viable.<\/span><\/p>\n

When you enter your CFD, the position will show a loss equal to the size of the spread.\u00a0This means that if the spread from your broker is 5 cents, you need the stock to appreciate at least 5 cents to break even.<\/span><\/p>\n

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CFDs vs Stocks<\/span><\/strong><\/p>\n

Using the example above: Suppose the price of the underlying stock continues to rise and reaches an offer price of $26.00<\/span><\/p>\n

If you own the stock, your holdings are now worth $2600. Nice profit \u2013 ignoring commissions or trading costs the trader realizes $100.<\/span><\/p>\n

However, with the underlying stock at $ 26.00, the CFD will show the same profit of $ 100 \u2013 but it requires less means to open, only $ 125. Therefore in terms of percentage, the CFD returns a larger profit.\u00a0If the market moves the other way, the loss compared to our investment will be greater \u2013 both risk and reward increase.<\/span><\/p>\n

Of course there are other benefits to owning an asset rather than speculating on price.\u00a0We also ignore commissions and spreads for clarity.\u00a0But the above illustrates the relative differences in both methods of investing.<\/span><\/p>\n

Application<\/span><\/strong><\/p>\n

While you are day trading, you may not hold any CFD positions overnight.\u00a0On the other hand, you will probably place a high volume of CFD trades in one day.\u00a0To maximize your returns, you want to focus on liquid volatile markets.\u00a0CFD trading in oil, bitcoin, and forex are all popular options, for example.<\/span><\/p>\n

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CFD benefits<\/span><\/h2>\n

You may have already gotten some of the above advantages from CFDs, but let’s break it down and add a few more.<\/span><\/p>\n