What is CFD Trading and how does trading CFD work in the Philippines?

If you’re interested in trading stocks, forex, or commodities, you may have heard of CFD trading. But what exactly is a CFD, and how can you trade it in the Philippines? In this article, we’ll explain the basics of CFD trading and show you how to get started with a reputable broker like VT Markets.

What is a CFD?

CFD stands for “contract for difference.” Essentially, a CFD is a financial instrument that allows you to speculate on the price movements of an underlying asset, such as a stock, currency, or commodity. When you trade a CFD, you’re not actually buying or selling the underlying asset itself. Instead, you’re buying or selling a contract that reflects the price movements of the underlying asset.

For example, let’s say you want to trade Apple stock. Instead of buying actual shares of Apple stock, you could trade a CFD that reflects the price movements of Apple stock. If the price of Apple stock goes up, the value of your CFD will increase. If the price of Apple stock goes down, the value of your CFD will decrease.

Advantages of CFD Trading

CFD trading has several advantages over traditional trading methods. Here are a few of the key benefits:

Leverage: CFD trading allows you to leverage your capital, which means you can control larger positions with a smaller amount of money. This can amplify your profits, but it can also increase your risk.
Short selling: CFDs allow you to profit from falling prices as well as rising prices. If you believe a stock or commodity is going to decrease in value, you can sell a CFD and profit from the price decline.
Diversification: CFDs are available on a wide range of assets, which means you can diversify your portfolio and spread your risk across multiple markets.

The most popular CFDs to trade

S&P 500
NASDAQ
FTSE 100
Apple
Tesla
Amazon
Commodities such as, oil and gold

What is the difference between CFD and Forex?

CFDs and Forex are two different ways of trading financial instruments. On one hand, CFDs allow you to trade on the price movements of a variety of assets, such as stocks, commodities, and indices, without owning the underlying asset. Forex, on the other hand, focuses solely on trading currencies. In Forex trading, you buy one currency while simultaneously selling another, with the goal of profiting from the difference in exchange rates. While both CFDs and Forex involve leveraged trading, CFDs allow for more flexibility in terms of the assets you can trade, while Forex is more specialized in currency trading.

How to start trading CFDs?

It’s important to do your research and choose a reputable broker that offers competitive spreads and reliable trading tools. Additionally, it is important to use a demo account to practice with virtual funds before risking real money.

Top CFDs to start trading for beginners

S&P 500
Dow Jones
USD
EUR
GBP

For novice traders, it is recommended to start with CFDs that are simple and low-risk to avoid significant losses. One good option for beginners is CFDs on major indices like S&P 500 or Dow Jones. These indices are less volatile because they comprise multiple stocks, making them easier to manage. Alternatively, beginners can also opt for popular currencies like USD, EUR, and GBP for CFD trading.

However, it is recommended to perform risk management before you start any trading activity for CFDs.