How can I trade CFDs?

Learning CFD-Trading

When learning CFD trading, it is important that you understand that you end up speculating on the underlying price movements in the market you choose, rather than investing directly in that market. Depending on your trading strategy and market conditions, you can open either a buying position (going long) or a buy position (going short), which gives you the opportunity to take advantage of the volatility of the market.

For example, if you’ve chosen to trade Tesla shares and your research suggests a potential drop in the stock price, you can open a short selling position for CFDs on Tesla. For every point where the price of Tesla shares fell below the point where you opened your position, you would benefit. Keep in mind, however, that CFD trading is a leveraged product, and the opposite is true: if the market moves against you, you would lose a multiple of your bet for every point that the market moves against you. CFD trading is also popular with equity investors as a tool to hedge physical equity portfolios, and this can be an effective risk offsetting strategy if you currently own a physical portfolio.

How to choose the right market for your strategy

At GBE brokers, you have a huge choice when deciding which markets are right for you. An important part of your trading strategy will be to determine the market opportunities that best suit your trading plan. As with any type of investment, research and analysis are critical when it comes to choosing the right market for trading and the best time to open your position. Make sure you have a deep understanding of market trends, sentiment and volatility before you decide to trade. Identify the topics and events that could drive the price movement and determine how this might affect your trading decisions. You can also get this information in our in-house newsroom, which offers you the latest articles, stock exchange-relevant videos and the Elbe Blick, our weekly stock exchange letter.

Determine the size of the position you wish to open

Before you enter the market, you decide on the amount of CFDs you want to trade and how this fits into your available trading budget. Their gain or loss will either rise or fall for each point where the market moves in one direction or another. For example, if you open a buy position of 5 CFDs on the UK 100 to 6800 and the price rises by 10 points to 6810, your profit is 5 x 10. Remember, as markets can both fall and rise, the opposite is true, and you would lose the value of your position for every point the market moves against you. If you decide how much you want to trade, be realistic about how much you need to invest and don’t bet too high. It is very important that you have enough margin in your account to cover your positions.

Decide in which direction you want to act

Your market research and analysis will help you get a sense of the current mood in the market where you want to trade. Your research will also help you better understand medium- to long-term trends that determine whether to open a buy (long) or short position on the market. Make sure that your decision is confirmed by your overall trading strategy and that the estimated timeframe you choose to trade is consistent with your short, medium, or long-term goals.

Learning how to rank in CFD-Trading

It is important to remember that when trading CFDs with leverage, and although this can increase your profits, it also increases your potential losses. When you trade CFDs at GBE, we provide you with a range of powerful risk management tools to help you trade at a level of risk that makes you feel comfortable. Our award-winning MetaTrader 4 or 5 platform makes it easy for you to choose the price point where you want to open a position in both directions, and there are clear options for adding stops and limits to protect against volatility. If you are using the price and the direction you have chosen, are satisfied and once you have added a stop or limit order to your ticket, click or tap the “New Order” button and then “Sell” or “Buy” to open your position.

Monitor your position and stick to an exit strategy

Once your position is live, it is critical that you monitor your CFD trading and keep up to date with market news, relevant data releases and macro events that may affect price movements. When you trade at GBE brokers Ltd., our fast, powerful MetaTrader 4 & MetaTrader 5 platform also allows you to monitor your position via iOS and Android whenever you want and wherever you go. This means that you never miss a trading opportunity and can react calmly to market movements as they occur. Use our precise drawing tools, advanced indicators and specialized chart types to track market movements, define support and resistance and determine the most profitable time to exit the market.

How to choose the right CFD market to suit your strategy

Deciding on the right market to trade in is a critical first step in developing a more comprehensive trading plan, and when considering your options it is important to start with a market that you already know or understand well from past experience.

Knowing how and why markets move and what potential events and economic factors influence them is extremely valuable in helping you develop a successful long-term trading strategy that consistently identifies relevant, profitable trading ideas. In the beginning, familiarity with a market will do much to help you feel more confident in your trading decisions and better analyze your performance. This is simply one of the basic steps in learning how to trade CFDs. Decide how much you want to trade and determine the best time to enter the market.

Deciding how much to invest in your position is a fundamental part of your overall strategy and can determine how long you keep your position open, how large or small your risk appetite is, and what type of risk management tools might be most useful to you. Especially at the beginning, try to choose a trade size that is well within your budget and does not over-burden your account. Having enough margin to cover your position is important, especially when the market moves against you in times like these. We hope this information has helped you learn how to trade CFDs. If you have any questions, our personal account managers are always available to assist you.