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What is CFD trading?

What is CFD trading?

At iFOREX you have the opportunity to trade CFDs and take advantage of price movements without actually owning the instrument that you trade.

Confused? Let’s start at the beginning: Contract for Difference (CFD) is a contract between a buyer and a seller to settle on the difference in value of a financial asset or instrument from the time the contract is bought until it is sold or vice versa.

Need a visual explanation?

Take a quick look at this informative video:

Good to know:
When you open a CFD deal, you buy ‘contracts’. E.g: One contract is the price of 1 barrel of oil / 1 ounce of gold / 1 share, etc.

Types of CFD products

Here are the three main types of CFD products that you can trade online.

Shares

By trading a share CFD, you can invest in the shares of leading brands such as Facebook, Adidas, Apple, BMW and Google, without actually owning the shares. It’s a fast and simple way to take advantage of the share price of the world’s leading companies.

Commodities

Let’s say you want to invest in oil. By trading CFDs, you can invest in oil without having to buy actual barrels and keep them in your back yard. There are many other commodities you can trade including gold, corn, platinum, coffee, silver and others.

Indices

An index follows and measures the performances of a specific group of stocks from a specific stock exchange. Thanks to CFD trading, individuals can now easily invest in the world’s most popular indices such as the Dow Jones, NASDAQ, DAX and Nikkei.

For the full list of our available CFD instruments, visit our trading conditions page.

The key features of CFD trading

  • CFDs allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions). This means you can trade even when the price of an instrument goes down.
  • At iFOREX you can trade CFDs with leverage, meaning you can open large deals with a relatively small investment.
  • You can trade anywhere and anytime using advanced platforms for web and mobile.
  • You don’t need to own - or store - the products you invest in.

How to choose a CFD instrument?

iFOREX offers a wide variety of CFD instruments you can invest in, so how do you choose? Many traders prefer to start with instruments they know well or can easily obtain information about. More experienced traders sometimes choose to diversify their trading portfolio, in order to maximize their trading potential and to optimize their risk-management.

How to open your first CFD deal

Are you ready to open your first CFD deal? Great! You can do so in three simple steps.

  1. Choose an Instrument
    Let’s say you want to trade crude oil. If the price of one barrel of oil is $50, one CFD on Oil will also be worth $50
  2. Choose Your Deal Size
    By using leverage you can buy up to 200 times more oil with your investment. For example, with a $100 investment, you can buy $20,000 worth of oil CFDs (in this example 400 contracts), using 200:1 leverage
    $100 X 200 = $20,000.
  3. Choose Direction
    When you trade CFDs, you can open trades even when you think prices will go down. If, for example, you think that oil prices will drop, open a “Sell” deal. You did? Great. What’s next?
  4. Close your deal and collect the profit
    Let’s say the price of oil has dropped to $49 and you decide to close your “sell” deal.
    Open Rate
    $50
    Closing Rate
    $49
    Difference
    $1
    This is a change of $1 for 400 contracts, meaning a profit of $400 with a $100 investment.
Want to learn more about CFD trading?

Join iFOREX to benefit from our exclusive education package and start taking advantage of market opportunities.

Our Education Package includes:

  • 1-on-1 training with a trading coach

    1-on-1 training with a trading coach

  • A FREE PDF guide for beginners

    A FREE PDF guide for beginners

  • A $5,000 demo account for training

    A $5,000 demo account for training