What are CFDs?

The abbreviation CFDs stands for Contract for Difference. A CFD offers traders an opportunity to possibly earn a profit from speculating on the price movement of an underlying asset, without actually owning the asset. A CFD is basically a contract between the buyer and seller specifying a certain purchase price of an underlying asset in any of the major financial markets: Forex, Stocks, Indices, Commodities, Cryptocurrencies. During a specific timeframe, the contract allows for profits or losses based on the changes in the price of the underlying asset.

How are CFDs traded?

While trading CFDs, you are predicting the price movement of specific underlying assets. If your prediction is that the price of an underlying asset is going to rise, you would choose to buy, but if you speculate that the price is going to drop, you choose to sell the asset. You do not physically own the asset when you are investing in CFDs, but you are investing in the chance to potentially earn a profit from the movement of the asset. It is important to keep in mind that you can lose your investment if the asset’s price should move in a direction opposite to your position.

For Example:

1. You have researched the Amazon stock and you deduced that they indicate that the Amazon stock is going to plummet. After entering the PatronFX platform, and checking the real-time graph, you decide that you agree, in this case, you would choose to sell.
2. You listen to a financial podcast daily, and they indicated that the price of the Nasdaq Composite might rise after an important announcement later that day. After performing your own research and checking the graphs, you agree with their assessment. In this case you would choose to buy.

In either of these cases, should you predict correctly, you would profit from these movements. However, an incorrect prediction would mean that you would lose your investment.

Choose from hundreds of different underlying assets to trade CFDs on using PatronFX easy to use trading platform.