Introduction to CFDs
Chapter 1 is all about the introduction to trading CFDs covering a number of key basics to get you started. For those who are new to trading a leveraged product such as Contracts for Difference (CFDs), this chapter will provide an excellent grounding. If you are a little more experienced and have been trading CFDs for some time, then you may wish to skip to the more advanced chapters within the book.
Fortunately CFDs are a relatively simple concept to understand and are considerably less complex than both options and futures. If you are just looking to trade share CFDs and you’ve been trading ASX shares for some time, then we believe you will pick up the key concepts of CFDs very quickly.
Obviously a CFDs Made Simple book wouldn’t do anyone any justice if it didn’t cover everything you need-to-know about trading share CFDs, forex, indices, sectors and commodity CFDs. In Chapter 1 you will learn:
- Everything you need-to-know about trading CFDs including what is a CFD, what is a derivative, how to profit or make a loss with CFDs and more importantly who should and should not be trading CFDs
- What is shortselling and how you can identify market downturns and take advantage of falling markets
- How to come to grips with share CFDs, index CFDs, commodity CFDs and foreign exchange CFDs so you can find the perfect market to suit your style of trading and temperament
- How to make the move from shares to CFDs, options to CFDs and the advantage of trading CFDs versus trading the futures market
- Discover why people trade CFDs and what the main benefits of trading Contracts for Difference are as well as the disadvantages
- What are the trading costs associated with Contracts for Difference and what you must know about these trading costs in order to protect yourself
- CFD finance, understanding currency exposures and coming to grips with exactly how margin works in your account
- Dividends, corporate actions and using CFDs as a hedging tool
- Advantages and disadvantages of both direct market access CFDs and using the market-maker model
One of the most important aspects to any financial product is having a solid understanding of how it works and whether or not it is right for your circumstances. Whilst we cannot say if CFDs are right for you, our goal is to provide an excellent overview of all the benefits and risks associated, so you can make an informed decision on your own.