LONDON, April 13, 2012 /PRNewswire/ --
A Contract for Difference (CFD) is a derivatives product, allowing you to trade on the live market price movements without having to own the underlying instrument on which the contract is based.
I myself choose trade using a CFD trading account with City Index - through this spread betting and CFD trading provider, I can access my account across a range of powerful and professional trading platforms - fully and securely.
First, let's consider the key features of CFD trading:
- Ability to profit from a falling market by going short and selling
- Hedge your portfolio using a CFD to offset losses
- Deal 24-hours a day, 7 days a week with unrestricted account access
- High leverage sees you pay only a small percentage of the total trade value as a deposit
- Access to trade via a variety of trading platforms including online and mobile
As a leveraged product, CFDs enable you to trade on over 12,000 financial markets by paying only a small fraction of the total trade value of the contract in order to open your position - as opposed to paying for it in full. This is also known as 'margin' or 'leverage'.
Ultimately, this feature offers you the potential to magnify your return on investment, heightening your profits.
However, it is important to remember that this feature can result in losses that could exceed your initial deposit.
Leverage Example: Let's consider Vodafone shares. If you want to trade on Vodafone shares through City Index, you'll be required to place a deposit of just 5%.
If you wanted to trade on the UK 100 and Wall Street with City Index, you'll be able to trade with a deposit of starting at just 1.5%.
Why choose CFD trading?
I, like many traders, choose to trade CFDs as the leverage features allows me to magnify my return on investment (ROI).
This is because my full trade exposure is much higher than the initial deposit required for the trade.
However, for those new to trading, it important you understand that your losses are magnified in exactly the same way as gains; if the market moves against your position, it can lead to losses exceeding your initial outlay.
Through thorough analysis and employing risk management tools, you can understand the risks involved and limit your potential losses.
It is also recommended that you seek independent advice if necessary.
CFD trading with City Index helps traders access over 12,000 markets, with just a small initial deposit. Its leverage feature offers the potential for magnified profits. However, it is important to fully understand the risks prior to placing a trade with the potential for greater losses also.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.
We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.
SOURCE City Index