How does Commodity CFD trading work?
A Contract for Difference (CFD) is an agreement between the buyer and the seller. It means that the seller will pay the buyer the difference between the commodity’s current price and its price at the point the contract specifies.
By trading CFDs on commodities, investors are speculating whether the value of the instrument will rise or fall.
What are the benefits of Commodity CFD trading?
One of the main benefits of CFD trading is that you’re trading on the expectation of a price movement, so you don’t have to actually buy (or take delivery of) the underlying asset. Because you can take a short position (expecting the price to decrease) as well as a long one (expecting the price to increase), you can still make a profit when the commodity falls in value — not just when it rises.
This gives commodity CFD traders greater flexibility and more opportunities to earn from market movements. By the same token, you should be aware of the potential for losses when going long or short on a commodity’s price.
What is the difference between CFD trading and investing?
The difference between CFD trading and investing is that CFDs are leveraged. Investing, on the other hand, is non-leveraged.
It is for this reason that CFDs are preferred for both day and short term trading strategies.
Can you trade stock CFDs?
You can trade stock CFDs with FXTM, which is a great way to diversify your portfolio. Trading stock CFDs allows you to access popular company stocks without having to purchase them outright.
You can find out more about trading stock CFDs, including how to open an account with FXTM, the benefits of trading and an explanation as to the process involved, at our stock CFDs page.