CFD Dealing: What You Should Know About Trading CFDs

If you're looking at the trading instrument of CFDs, then here is an overview on trading CFD products.

When CFDs first became available, they were provided by commission free CFD providers. This meant no fixed cost in a trade. Later they were no longer commission free in Australia, and other providers came along which also had commission.

As time goes on, there are more CFD providers or brokers, and some of these have zero commission. Keep in mind that there may be other fees involved with trading and accountsas well. See here for more on brokers.

So keep these things in mind when choosing a CFD provider to trade a system.

1. Firstly, choose a CFD provider where you are happy with their costs, conditions and stability. This means have a look at their commission rate (including zero commission), the spread (which you can see on their demo or real account), and lack of fees (some providers charge a monthly fee for data, but most do not). These make a difference with your online cfd trading results.

2. Do you have a CFD trading strategy?

A CFD strategy or system means that you have a system that you can trade. There are many types of CFD systems, from ones based on fundamental analysis to technical analysis and price action or chart patterns. The main thing meant by a system is that it contains rules. Rules consist of entry rules, exit rules, stop loss rules, training stops rules and which markets to trade eg which stock market and the type of CFDs, such as stock CFDs, index CFDs, commodity CFDs and others.

3. Practice on a trading platform out to see that you can easily place trades.

Most platforms are similar, however if you are not familair with a platform, ti is more likely to make mistakes. If you have a system that uses charts to plan an entry, then check that you can use these. If you use them for trailing stops, then check that these can be done. Even if your system is mechanical, you may still want to look at the charts of each CFD (be it stock or share, commodities, indices or other derivative) that you enter to see what it has been doing recently.

Check that the types of entries you want to use are available. For example, if you use limit buys or sells, or simply market orders, or stop entries (buy or sell), then check that you can use these. With stop losses, including trailing stops, see that you can place these too. Many providers offer stop losses at a specified price, while some may offer a trailing stop at a distance or percentage distance away from the current price. Just make sure that it has whatever you want to use. Not all providers necessarily offer stop entries.

4. Check the instruments that are available to trade with the CFD provider.

For example, CFDs may be available on many markets, such as on shares in a particular market be it the ASX, the US stocks, commodities or indices (such as ASX S&P 200, DAX, FTSE, Nikkei, Dow Jones, S&P 500, etc). When you're on their demo platform, check that you can trade these. With some providers you can trade various intruments on the same account such as forex, shares, commodities as well as CFDs in these various categories. If you trade more than 1 instrument and do it at the same time of the day, and want to watch everything from one platform, then this may be possible.

5. Finally, check to ensure other details such as how to transfer funds, customer service, and how support is handled as well as their stability.

Some CFD providers offer phone and email dealer desk support depending on your question or the type of help needed.

Also check that the company is stable. Do your own due diligence on a broker before investing with them. Of course, this is not financial advice that CFDs are suitable for you, as you should seek your own financial advice before trading or investing.

As mentioned above, commissions associated with trading CFDs vary between providers. An example of the ones to consider is demonstated here:

For example, costs include:

1. Commission as a % and also remember the minimum commission as well.

2. Financing charges (interest) for overnight held long positions: depends on number of days in trade and reference bank rate used.

3. Any monthly data fees for the particular exchange data that you require nd whether this is waived if you have a certain number of trades per month.

So keep these points in mind when dealing CFDs, to ensure that you have the information you need for trading CFDs.


All trading involves a high risk of financial loss, and the information on this site is for general information purposes only and is not financial advice in any form. Seek your own financial advice before taking any action.

All forms of trading involves risk of financial loss.

Also note that CFD trading is not legally permitted in some countries.

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