CFD, which stands for contract for difference, is one of the fastest growing regulated investment styles in the market place. The name essentially says it all. It is a contract between you and your broker for the difference in the value price from the time you open the contract until the time you close the contract. If the difference is in your favor, it is profitable but if the difference goes against you, it is your loss. You can sell or short an asset or you can go long or buy an asset, this is up to you. If you sell an asset, you will have to buy it back in order to close your contract, whereas if you buy a contract, you will have to sell it back in order to end the contract. The difference between the two contracts is your profit or your loss. CFDs do not have expirations so you can keep the contract open as long as you like, although CFDs are considered short term investments. You also do not have a contract size like you do when you are trading in the futures or options markets. You can buy as little or as much as you want.
CFDs are available for just about every type of asset you want to trade, including currencies (forex), commodities such as gold and oil, stocks from exchanges around the world and indices, such as the Dow Jones and the Nikkei. You simply choose the asset you wish to trade. So, with one broker and one account, you have access to almost all the markets and assets from around the globe.
CFDs have built-in leverage which allows you to easily ramp up your trading capital to see larger profits. Leverage and margin requirements are built right into the trading platform so you will see, when you open the asset screen, the amount you will need in order to trade the asset you selected , and you can keep adding quantities based on your account balance. You must understand the use of leverage as it also increases your risk.
When trading CFDs, there are no exchanges involved and your broker is taking the contract so you can quickly open and close positions. Remember, when you are trading CFDs, you do not own the asset; you are only trading on the difference in value. The price of the CFD mirrors the value of the underlying asset but this means that in a volatile market or a crashing market, that you should be able to close your position quickly and easily with your broker. Also, there are no requotes. The price of the CFD is posted on your screen. When you trade with NSXCOIN, you can also set your Stop Loss to protect your risks and enter a Take Profit level so that your trade will close automatically when that price is reached. You can also use trailing Stop Losses and Limit orders when trading with NSXCOIN.
There are many other advantages for a novice trader as these investments can be kept small and your risk can be limited, whereas when you are trading in the commodities market, you might need to purchase a minimum of 1000 barrels of oil or 42,000 gallons of gasoline. With CFDs, you can trade one unit of the selected asset.
Just by looking at the growth statics of this industry, you can easily understand that trading contracts for difference have a great deal of advantages over trading in other formats. Imagine you wish to trade Apple stocks because you are sure Apple is going to soar when they introduce their new products. You only have $1,500 in your account. This means that if Apple is trading at $140 a share, and you were trading with a stockbroker, you could only buy 10 shares of Apple. So, what if Apple soars by $10 a share? You only earned $100. On the other hand, if you were trading Apple CFDs with NSXCOIN, you could purchase around 1000 shares of Apple with the same capital. Now, you do not own these shares but you do care about the profits. You execute a long or buy position for Apple at $140 and when you think Apple has reached your top level, you execute a sell trade and close out your trade with $10 profit x 1000 shares and you have earned $10,000. Now, this is only an example but say you also can’t afford to take that kind of risk, so you set a Stop Loss for your Apple contract, saying that if Apple falls to $139 a share, to close your position. If Apple disappoints, you exit your trade with only a $1,000 loss. Now, while you do have to learn how to manage risk and use good money management skills, CFDs are the way to go. Look at all the advantages. To learn more, visit the NSXCOIN education center.
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