What is CFD trading?

Do you want to maximize your earnings? Trading CFDs can be one of the best options. With it, you can earn money in different ways, achieving much more visible results and deciding when to stop.

In this article written by dotbig.com, you can find all the information you need to know to enter the CFD trading world fully.

What are CFDs?

Its acronym in English corresponds to "Contract For Difference"; a CFD is nothing more than a contract for difference. In this model, two users are established with key functions: buy and sell. These are generally geared towards underlying assets, such as small/medium company stocks, bonds, or currencies.

How do they work?

Being a market that provides freedom and flexibility to users, its methodology is simple but requires quite deep studies to make a profit.

The CFD allows you to take advantage of the ups and downs of the market through purchases and sales of shares. In this way, the user seeks to buy an underlying asset at a price, claiming that it will rise in cost (known as investing up). Thus, if the buyer has bet $ 20 and the stock has ended up closing at $ 25, he will have a reward of $ 5.

On the contrary, if the user seeks to sell an asset, he invests in the registration, obtaining the remaining amount he has determined as profit. If the rate ends up behaving differently in both cases, the amount remaining at the established amount will be lost.

What does it have to offer you?

If you are new to the market, CFD is one of the best ways to start trading. Know the points in your favor:

Free contract

However, one of the greatest qualities of this market is the great freedom it provides to its users. With it, you can decide when to start or stop, allowing greater control of profits and reducing possible losses.

Action margin

CFD trading allows you to invest in a liquid product, betting with higher money positions, but only by depositing a small amount. Thus, you can handle a larger sum, investing up or down a valuable stock but only contributing 10% of its value.

You must know that the profits in this modality can be many, even tripling the amount invested. However, you also run the risk of loss if the rate behaves differently.

Greater investment possibility

Unlike other markets, CFDs allow you to bet on markets that work on the rise or fall of underlying assets. Allowing users a much more complete strategy and, of course, greater chances of profit.