What is CFD trading?
Most of the world’s population have regular jobs from which they receive a salary in return and thus pay their bills at the end of the month. During last year, and especially after the outbreak of the pandemic, many have started to follow a new trend that has the potential to increase their household income. This new trend is trading. But what is trading and how is it done?
What is trading?
Trading is nothing more than buying and selling different underlying assets in financial markets. Traders Trust offers trading on products such as Forex, Indices, Commodities, and Cryptocurrencies in the form of CFDs. CFDs are Contracts For Difference (CFD). They are contracts in which it is stipulated that the seller will pay the buyer the difference between the value of an underlying asset and its value at contract time.
To summarize, trading is a position (sell or buy) on an underlying asset´s price in the market. You can choose between commodities (such as gold, silver, and oil), indices: (such as the American Nasdaq, DowJones, SP&500, the Spanish Ibex35, the German Dax30, the Japanese Nikkei, and the Chinese HK50,; cryptocurrencies (such as Bitcoin, Ethereum, Litecoin and Bitcoin Cash), and, finally — perhaps the best known in the world — Foreign Currencies commonly known as Forex ( such as the Euro, US dollar, Australian dollar, Pound Sterling, etc.).
How is it done?
Trading consists of selecting an asset among the different asset classes and opening a trade either to “buy” or “sell” the selected asset. In trading, buy trades are called long positions (the candle on the chart of that asset will be green), and sell trades are called short positions (the candle on the chart will be red). So, when you think an asset is going to go up, you opt to buy, or in other words, you open a long position. On the contrary, when you think an asset is going to go down, you can choose to sell, which is the same as saying that you opened a short position. Fun fact about long and short positions: Investors or traders who trade long positions are commonly referred to as bulls (they charge upwards) and those who like to trade short positions are called bears (they attack with their paws downwards). In short, it is a matter of buying or selling positions in a particular asset.
Which instrument?
Once you have a basic understanding of what trading is and how it is done, one question remains: what to choose? Well, the answer to this question depends on the trader’s or investor’s taste. It could be gold, silver, a global index such as the DowJones or Dax30, a forex pair, or a cryptocurrency. One thing is for sure, you have to keep an eye on the news, market movements, and politics. There will be a post focusing on this so stay tuned.
In the meantime, why not open an account and put what you have learned into practice while taking advantage of the promotions offered by Traders Trust? Are you a bull or a bear?
