CFDs (Or Contracts for Difference) are a unique way to trade, and are increasing in popularity every day. This is due to the flexibility they offer, and the low costs they incur. Just like spread betting, they allow those traders using them to take advantage of price movements. Another benefit is that there is no stamp duty as you do not have to buy the underlying assets.
This may all sound well and good, but what actually are CFDs? They are a contract between the buyer and seller which means they pay the difference between the start and end balance when the contract terminates.
However, no matter how simply you try and put it, the truth is that they are a complicated matter, and the more you know about them before you start trading the better you will do.
Reading around the subject before you begin to trade is a good idea, and there are plenty of training sessions available to teach you how best to use this method of trading to be both safe and profitable. The main issue that many people find with Contracts for Difference is how quickly and often decisions have to be made. These are not the types of stocks you can simply forget about as the market can fluctuate dramatically and you need to take advantage of that.
A successful CFD trader will take their time before they begin, research thoroughly and actively make all the decisions. It can also be wise to start off by investing in products that you know about, leaving the unknown until you are more experienced.
Overall, trading in the CFD world can be very rewarding, but you must bear in mind the fast paced decisions, fluctuating market and how much you can afford to lose before beginning to take part in it.