CFD certificates is a great way to be able to earn a lot of money without a lot of money to invest. They allow you to make leveraged trades on almost all markets. CFD certificates is a good way to break the script and become more successful than the world want you to be as they allow you to earn the same returns as a much richer man who is not using this tool.
What is a CFD?
CFD is an abbreviation for contract for difference. A contract for difference is a type of financial instrument that entitles you to the profits and losses generated by an underlying asset such as a stock or a commodity. You never own the asset itseöf. Just the right to the return that is accrued during the time you own the CFD. CFD certificates are designed with day trading in mind and most CFD positions are closed the same day they are opened. You are allowed to keep the position open overnight if you want to. If you want to do so you have to pay a fee. You can read more about why this is further down in the article.
Most CFD:s are leveraged. This entitles you to the profit or loss from a large investment than the way you really did. This is the strength of CFD and the reason that so many traders choose to trade with them. Leveraged CFD:s is an excellent tool that allows you to earn a lot of money. There is usually no reason to ever trade unleveraged CFD:s.
How to trade?
Trading CFD:s is very easy. Anyone who can buy and sell things online can open and close CFD positions. Knowing which CFD:s to buy and when on the other hand can be a lot harder and you need to learn to become skilled at predicting the markets movements of the assets you trade with to be able to earn money.
If you want to start trading CFD:s you are going to need an account with a CFD broker. There are plenty of different online brokers to chose from. Examples of good reliable CFD brokers include AVAtrade, IG, PLUS500, and eToro. In most cases, it does not matter which of these brokers you chose to use. Any broker with a good reputation is a good choice. If you want to trade certificates based on a specific asset then you should make sure that a broker offers CFD based on that asset before you register. Most brokers only offer CFD:s based on a selection of assets.
What is the spread?
The spread is how the broker makes a profit. It is the small difference between the buy and the sell price of a CFD. A smaller spread is to be preferred as it makes it easier to make money. If you buy a CFD and then sell it again before the price has changed then you will lose money due to the spread.
The value of a CFD is slightly different than the value of the underlying asset due to the spread.
Why do I have to pay an overnight fee?
The overnight fee is based on current interest rates and is paid to compensate the broker for the interest they have to pay. When you buy a leveraged position the broker by the underlying asset on the market. The size of the position they buy corresponds to the size of your investment and the leveraged used. Ie if you buy an x30 CFD for USD1000 then the broker will buy USD30 000 worth of the underlying asset on the open market. The overnight fee is based on the fact that the broker basically lends you 30 000 to invest. You do not have to pay anything if you close the position the same day because then the broker never has to front you the money.
Are CFD high-risk instruments?
Yes. Investing in CFD:s is high risk. The higher the leverage, the higher the risk. It is a very powerful tool but it has to be used responsibly. It can magnify both your profits and your losses.
Make sure that you understand how to trade successfully before you start trading using real money. Many brokers provide demo accounts where you can trade using virtual money until you feel confident that you can earn money trading for real. Do not start trading using real money to early. It is better to wait a little too long to make the switch than to make the switch too early.
Are CFD certificates a scam?
No CFD certificates are not a scam. They are a very valuable tool when used correctly. CFD certificates have however received some bad press over the years because dishonest financial managers have recommended CFD:s to people who did.o not understand how they work. People who ended up losing their money. CFD certificates are not scams, but many financial advisors only think about themselves.