How CFD Trading Leverage Works – How CFDs Trading Works
How CFD Trading Works
To trade CFDs you need software that allows you to access the market and place your orders upward and downwards. These software are commonly called CFD trading platforms and are usually offered free of charge by the brokers you subscribe to.
It should be specified that CFD trading is feasible both with downloadable software, with dedicated apps and also with browser access. Compatible systems depend on the software offered by the broker, so below we will go to specify which operating systems are compatible with the various platforms mentioned.
Those who do not have much experience and prefer an easy-to-use platform will find quite satisfying some very intuitive software, whose functionality is easily applicable by all users.
Those who have already gained experience with the technical analysis applied to trading, can find very satisfactory the use of more professional platforms, among which the most famous and used is the MetaTrader 4, which we have published an introductory course That explains in detail all the features offered by this software, as well as how to test it for free in demo mode.
READ ALSO: MetaTrader 4 course with free demo
How CFD Trading Works
We have so far seen how we can do trading, what are its advantages and what are the best platforms to negotiate, but how technically does the negotiation of this tool?
The CFD trading is between the individual investors and the companies that offer this service, or brokerage or broker companies. Since there are no standard CFD contracts, each company can determine its own, while adhering to some common points such as:
The contract by difference begins when the user (the investor) opens an upward or downward position on a given instrument and ends when it closes the position on the same
The gain or loss of the investor will be proportional to the price change between opening and closing the position
As compensation for your service, the broker usually applies a spread or a differential between the purchase and sale price at the opening. It can also add fees for extra services, overnight (nightly financial Service tax) and in some rare cases also a managerial fee if it offers portfolio management
The daily closing of the market, a position is reinvested and brought to the next day
CFDs are “margin” products and this means that the trader or investor must always maintain the minimum margin level. In the event that the amount of money deposited on the CFD platform drops to a level below that of the minimum margin, the broker will make a margin call (margin Call) asking the trader to quickly cover those margins, which otherwise will lead to the closure of the positions by the broker in order to protect themselves.
How CFD Leverage Works