Why Trade CFDs?

In recent years, CFDs have become the most popular way for online investors to trade commodities, currencies and stocks. Since CFD trading does not involve the actual asset and operates independent of the market, it allows for greater flexibility than traditional trading — for example, access to foreign markets, leveraged trading, fractional shares, and short selling.

What is CFD trading?

CFD trading is defined as ‘the buying and selling of CFDs’, with ‘CFD’ meaning ‘contract for difference’. CFDs are a derivative product because they enable you to speculate on financial markets such as shares, forex, indices and commodities without having to take ownership of the underlying assets.

Instead, when you trade a CFD, you are agreeing to exchange the difference in the price of an asset from the point at which the contract is opened to when it is closed. One of the main benefits of CFD Trading is that you can speculate on price movements in either direction, with the profit or loss you make dependent on the extent to which your forecast is correct.

The sections that follow explain some of the main features and uses of contracts for difference:

Leverage

CFD trading is leveraged, which means you can gain exposure to a large position without having to commit the full cost at the outset. Say you wanted to open a position equivalent to 500 Apple shares. With a standard trade, that would mean paying the full cost of the shares upfront. With a contract for difference, on the other hand, you might only have to put up 20% of the cost.

Short Or Long

CFD trading enables you to speculate on price movements in either direction. So while you can mimic a traditional trade that profits as a market rises in price, you can also open a CFD position that will profit as the underlying market decreases in price. This is referred to as selling or ‘going short’, as opposed to buying or ‘going long’.Some description text for this item

Margin

Leveraged trading is sometimes referred to as ‘trading on margin’ because the funds required to open and maintain a position – the ‘margin’ – represent only a fraction of its total size.When trading CFDs, there are two types of margin. A deposit margin is required to open a position, while a maintenance margin may be required if your trade gets close to incurring losses.

Hedging

CFDs can also be used to hedge against losses in an existing portfolio.For example, if you believed that some ABC Limited shares in your portfolio could suffer a short-term dip in value as a result of a disappointing earnings report, you could offset some of the potential loss by going short on the market through a CFD trade.

Frequently Asked Questions

A CFD, or contract for difference, is an agreement to exchange the difference between the opening and closing price of the position under contract, rather than buying and selling the underlying security outright.

With Monyxa, you can trade a range of indices and commodities as CFDs. Register and check yourself!

We offer CFD trading with currencies, commodities, stocks and cryptocurrencies. 

Trading with leverage means using capital borrowed from a broker when opening a position. Sometimes traders may wish to apply leverage in order to gain more exposure with minimal equity as part of their investment strategy. Leverage is applied in multiples of the capital invested by the trader, for example 2x, 5x, or higher, and the broker lends this sum of money to the trader at the fixed ratio. Leverage may be applied to both buy (long) and short (sell) positions. It is important to note that any losses will be multiplied as well as profits.

All of our CFD markets, including markets on MetaTrader, expire.  When a CFD market expires, we close all open positions based on our most recent prices and all open orders are cancelled. To retain your open positions in a market, you must manually open a new position in the next contract month.

CFD shares don’t expire every quarter, certain trades do (energies, house prices, basically future trades) but with most markets you can hold a contract for difference for as long as you want to.

Any financial investment involves risk, and CFDs are no different. CFD assets traded without leverage have the same risk as those assets traded directly. On Monyxa, for example, you can invest in any asset without applying any leverage. However, trading CFDs with leverage increases your market exposure, thereby, increasing your risk.

A Contract For Difference (CFD) is essentially a contract between an investor and an investment bank or spread betting firm. At the end of the contract, the parties exchange the difference between the opening and closing prices of a specified financial instrument, which can include forex, shares and commodities.

The biggest difference between a CFDand a Forex contract is the fact that CFD’s cover a diverse range of markets. While forex is limited to the currency markets, CFD contracts can range from a stock CFD, commodity CFD or indices CFD. With forex, the lot size is uniform regardless of whether you trade EURUSD or USDCAD.

  • Higher Leverage.
  • Global market access from one platform
  • No shorting rules or borrowing stocks.
  • Professional execution with NO fees.
  • NO Day Trading requirements.
  • Verity of trading opportunities.    
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IMPORTANT NOTICE: CFD’s are very complex instruments and come with a high risk of losing money due to leverage. It’s been proven that nearly 80% of all investors loose money when trading the CFD’s. You should wisely consider your understanding of CFDs and how they work and if you are willing to take the high risk of losing your funds. Please consider seeking a professional advice from an independent and licensed financial advisor to ensure that you have the relevant experience, knowledge and the risk taking appetite that suits you for trading. Monyxa shall have any liability under no circumstances to any person or entity for any kind of loss or damage resulting from, caused by or related to any CFD’s or any other trading transactions done at our platform. Most importantly, do not invest the capital that you cannot afford to loose. There are risks associated with on-line trading systems including, but not limited to, software and hardware failure, and Internet disconnection. Monyxa shall not be responsible under any circumstances  for communication failures, distortions or delays when trading via the Internet.

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