A big trading option which most Forex brokers offer are CFDs. You might have read that name on our website or in various Forex related websites. Here we present to you an explanation of CFDs.
CFDs stands for (contracts for difference) and it is a financial instrument that allows traders to trade in different markets which aren’t as flexible as the Forex market.
In other words it is a contract between two parties, a buyer (The trader) and a seller (the broker), stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time in the future, in case that the difference is negative, then the buyer pays instead to the seller.
The trader trades on the price variations of a commodity instrument without actually entering that market just like in Forex trading.
In CFDs trading there isn’t a identical size that you trade with. You can trade as much or little as your account allows.
The CFD markets are very similar to gold and silver markets. CFDs also allow you to trade many of the major stocks on major exchanges, the many large indices around the world, as well as energy markets. The good thing is anyone is able to trade with many various CFDs even without a big account.
The CFD uses a trading system similar to the Market Maker trading system in Forex, That is it never actually places our order in the market and your prices are set by the company. A major difference which can be viewed as an advantage is you can exit trades any time over the 24 hours of the day. In Forex trading if trades are left open overnight and big chances happen traders tend to lose a lot of money While with CFDs this problem is solved as you can exit at any time.