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:
The most popular CFDs to trade
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
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.
Official partners:
