How To Place A CFD Trade
CFDs allow you to trade on markets that are falling, give you the ability to use leverage, and make use of many different instruments, while some allow you to trade for 24 hours a day. For these reasons, investors are taking full advantage of this flexibility of CFDs as part of their diversified portfolio. What exactly are CFD’s can be found in this article on business24-7
CFD Trading Steps
- Choose A Market
First you have to decide which market you’d like to trade in. For trading inspiration, visit and study technical and fundamental analysis.
- Decide: Buy or Sell
If you think the market price will fall in value press “sell”, and press “buy” if you think it will rise.
- Select A Trade Size
Next you have to choose how many CFDs you’d like to trade, with 1 CFD equivalent to 1 physical share of equity.
- Add A Stop Loss
A stop loss is used in order to close a position at a particular price in case it might move too far against you.
- Monitor and Close A Trade
The moment you place a trade you will be able to see a profit-loss update at the top of your screen. This will give you a real time update of your position. By clicking the close trade button you will be able to exit a trade.
CFD Trading Explained
- Choose A Market
CFDs offer trading opportunities in many different markets like currencies, indices, shares, commodities, interest rates and bonds. These allow for instant access to global markets in Australia, New Zealand, Asia, the UK, Europe and the US.
With such a variety in choice, it is important to find the best trading opportunity that is perfect for you. Since most trading platforms have research tools, you can use these to help you identify that perfect trading opportunity.
With the search function available on the platform, you can search for and select a market.
- Decide To Buy Or Sell
After choosing a market, find out what the current price is. This can be accomplished by looking at a trading ticket on the platform. CFD markets trade on two prices. The first price being the selling price or the bid price, and the second being the buying price or the offer.
When subtracting the one from the other you get what is called the spread. The price of the CFD is determined by the price of the underlying instrument. Trading in CFD is determined by the following: If you believe the price will go up you will buy that market, also commonly known as going long. If you believe that the price will go down, you will sell the market, also known as going short.
- Selecting The Trade Size
Before trading in CFDs, you have to select the size or the amount of CFDs you’d like to trade in. When trading in equities a single CFD is equal to 1 share. With all others like forex, bonds or interest rates, indices and commodities, the value of a single CFD depends on the instrument. To see what number you’re trading on look up the tick value in your particular instrument’s information sheet.
Because CFDs are a leveraged product, you do not need to have a huge percentage of the overall trade value, commonly known as the margin, in order to enter into a trade. Basically, the bigger the trade you’re about to enter into the bigger of a margin that is required.
Make sure that you have sufficient funds in your account before you place a trade and make use of the margin calculator to calculate your initial margin.
- Add Stop And Limit Orders
Before placing a trade, consider a risk management strategy. A good risk management technique is to include a stop loss in your trade, which will close a trade when the market reaches a particular level. In essence a stop loss order instructs the platform to close an open position once the trade reaches a certain level set by the trader. A stop loss is beneficial, as it triggers just in time to prevent further loss.
A limit order on the other hand closes a trade at a price which is better than the current market price for that instrument. It helps to lock in profit targets.
- Monitor Your Trade
Now that you’ve placed a trade and included stops and limits, it is time to monitor the trade. The profitability or loss of your CFD trade will be influenced by every move of the market price. Whilst in a trade, you will be able to track the market prices, see profits and losses in real time and add additional trades or close existing ones.
- Closing Your Trade
Once you are happy with your trade and want to close it, choose the close position option and close the trade using a CFD broker like Plus500. Upon closing the trade, you will be able to see your net profit and loss and it will be visible in your account cash balance.