CFD trading with easyMarkets offers a vast array of instruments and robust risk management tools on a user-friendly platform.
CFD Trading with easyMarkets
A Contract for Difference (CFD) is a popular form of derivative trading. CFD trading enables you to speculate on the rising or falling prices of global financial markets or instruments. When trading CFDs, you don’t buy or own the underlying asset – you buy or sell units for a particular instrument or market, depending on whether you think prices will go up or down.
- Where to Trade:
- With easyMarkets, trade on any device – mobile, tablet, or PC.
- Benefits of Trading:
- Access a broad spectrum of financial markets and instruments, utilize low margins, and adapt to various trading styles.
- Why easyMarkets:
- Benefit from a vast selection of CFDs, competitive spreads, top-tier customer service, and an innovative platform that guarantees no requotes on trades.
- Trading Mechanics:
- If you anticipate a market will rise, you ‘buy’ (go long). Conversely, if you believe it will fall, you ‘sell’ (go short). Your profit or loss is determined by the market’s performance.
- CFD Expiry:
- Many CFDs on easyMarkets don’t expire, but some, like futures contracts, do. A spot fee is charged daily.
- Leverage levels vary based on the CFD. For instance, leverage for major currency pairs is 30:1, while for cryptocurrencies, it’s 2:1.
What is CFD Trading?
In essence, CFD trading means you’re entering into a contract with a broker to exchange the difference in price of an asset from the point you open your position to when you close it. Unlike traditional investing, where you take possession of an asset, CFDs let you trade on the price movements without ever owning the underlying asset.
Going Long vs Going Short
- Going Long:
- Suppose you believe that Ethereum (ETH) will gain value. If ETH/USD is trading at $4,000 and you decide to purchase 5 ETH, you’ll essentially be spending $20,000. If Ethereum’s price rises by 5% to $4,200 and you decide to close your position, your gain will be $200 per ETH. This amounts to a profit of $1,000.
- Going Short:
- Conversely, if you think Cardano (ADA) will lose value, you might decide to open a short position. If ADA/USD is priced at $2 and you sell 1000 ADA, you’ve effectively sold assets worth $2,000. If Cardano’s price subsequently rises to $2.06, and you close your position, you’ll incur a loss of $0.06 per ADA, totaling $60 in losses.
What is Leverage in CFD Trading?
Leverage is a feature that allows traders to magnify their exposure to the market with a relatively small capital outlay. Suppose you want to buy 1 Amazon CFD valued at $3,000. With 5:1 leverage, you only need to deposit 20% of the full value ($600) to open your position. However, remember that while leverage magnifies profits, it also amplifies losses.
Benefits of Trading CFDs with easyMarkets
- Directional Trading: Benefit from price movements in both directions: long (buy) or short (sell).
- Leverage: Increase your market exposure without the need for full capital outlay.
- Variety: Trade over 275 CFD instruments, including cryptocurrencies, shares, forex, and more.
- Flexibility: Some CFD instruments allow for 24/5 and even 24/7 trading.
- Risk Management Tools: easyMarkets offers tools like guaranteed stop loss, negative balance protection, and dealCancellation to mitigate trading risks.
Risk Management in CFD Trading
Effective risk management is crucial in CFD trading. Here are some strategies:
- Develop a Trading Plan: Strategize and avoid impulsive decisions.
- Use a Regulated Broker: Ensure the broker is under stringent regulatory oversight for enhanced security.
- Avoid Over-leveraging: Understand the implications of leverage and use it judiciously.
- Utilize Trading Tools: Use tools like guaranteed stop loss, dealCancellation, and negative balance protection to manage potential losses.
Innovation is Key: From pioneering online trading to offering the ability to deposit, trade, and withdraw in Bitcoin, easyMarkets has always been at the forefront of innovation. As the official online trading partner of Real Madrid, it offers an extensive array of instruments including forex, commodities, shares, indices, and cryptocurrencies.
The easyMarkets App: Offers a wide range of features, from trading 275+ instruments, including major and exotic currency pairs, metals, and popular stocks, to accessing market news and analysis.
CFD trading with easyMarkets provides access to an extensive selection of instruments, combined with robust risk management tools and a user-friendly platform. It’s essential to understand the risks associated with CFD trading and to leverage the tools available to ensure you’re making informed decisions.
Disclaimer: CFD trading is risky, and you may lose more than your initial deposit. Always ensure you understand the risks involved and consider seeking independent advice if necessary.
FAQs about the CFD trading with easyMarkets
- 1. What is a CFD?
- A contract for difference (CFD) enables you to trade an instrument’s price fluctuations without actually owning the underlying asset. You enter a contractual agreement with a broker to exchange the difference in price from the beginning to the end of the trade.
- 2. What does it mean to go long or short in CFD trading?
- “Going long” means you expect the asset’s price to rise. For instance, if Ethereum is trading at $4,000, and you predict a rise, you’d buy (or go long). Conversely, “going short” means predicting a drop in price. If you believe Cardano will decline from its $2 price point, you’d sell (or go short). Your profits or losses depend on the actual price movements of the asset.
- 3. How does leverage work in CFD trading?
- Leverage allows traders to open larger positions with a smaller amount of capital. If an Amazon CFD share costs $3,000 and you use 5:1 leverage, you’d only need to pay 20% ($600) upfront, with the broker covering the rest. However, leverage increases both potential profits and potential losses.
- 4. Why should traders consider CFDs?
- CFDs offer various advantages, such as benefiting from price movements in either direction (long or short), leveraging your positions for greater market exposure, and accessing a vast array of trading instruments, from cryptocurrencies to shares. Plus, with specific platforms like easyMarkets, traders can utilize innovative risk management tools.
- 5. What risk management strategies should be employed in CFD trading?
- Risk management is essential. Traders should have a clear trading plan, use regulated brokers, avoid excessive leverage, and utilize risk management tools like guaranteed stop losses, negative balance protection, and dealCancellation features. These tools can help mitigate losses and protect your trading capital.
- 6. What are some unique features of the easyMarkets platform?
- easyMarkets offers a range of innovative tools, such as dealCancellation, which allows traders to undo a losing trade within a specific timeframe for a fee. The platform also provides negative balance protection and guaranteed stop loss. Moreover, easyMarkets continuously innovates, allowing deposits, trades, and withdrawals in Bitcoin without converting to fiat currencies.