Trading Type

Understanding CFD/Forex trading

Contracts for Difference (CFD) give traders all the benefits of owning a particular stock, index, or commodity position without having to physically own the underlying instrument itself. It’s a simple, easy and cost effective trading option.

In simple terms a CFD, is an agreement between two parties to exchange the difference between the opening price and closing price of a contract. CFDs are derivatives products that allow you to trade live market prices and take advantage of price movements without physically owning the underlying instrument on which your contract is based. You can use CFDs to speculate on the future movement of market prices regardless of whether the underlying markets are rising or falling.

CFD trading works like this
Eg: Instead of purchasing EUR 10,000 from a money exchanger, a customer could instead open a trade of 10,000 EUR/USD on Realfxm.com. A 100 point rise in the price of EUR would give the CFD customer a $100 profit. Alternatively, a 100 point drop in the price would mean a $100 loss for the customer, exactly as if the trader had bought the actual currency through a Money exchanger.

CFD’s are also used to hedge clients physical porfolio
Eg: If you believe your existing portfolio may lose some of its value, you can use CFDs to offset this loss by short selling. For example, let's say you hold $2,000 worth of Facebook shares in your portfolio. You can short sell the equivalent of $2,000 worth of Facebook shares through a CFD trade. Should Facebook share prices fall by 5% in the underlying market, the loss in value of your share portfolio would be offset by a gain in your short sell CFD trade. Many investors today use CFDs to hedge their physical portfolio, especially in volatile markets.

Benefits of FOREX/CFDs trading

Online CFD/Forex trading is gaining immense popularity Globally and is the Best way for clients to trade. The main reason is the ease and benefits of online Forex trading

There are numerous advantages to trading Forex/CFDs online

  • 2 Way Market
    With CFD trading, you can profit no matter which way the market moves. You can use CFDs to go “Short” (SELL) when you believe the asset price will fall or you can go “Long” (BUY) when you expect prices to rise. Based on your trade you can gain/lose according to the price movement in correlation to the trade executed by you.
    If you Buy an asset and the price rises you gain if it falls you lose alternatively If you Sell an asset and the price falls you gain if it rises you lose.
  • Leverage
    Online trading allows you to take advantage of Leverage meaning you can trade higher volumes of assets at low cost since you do not pay the full price of the asset but only maintain a margin starting from just 1% of the deal size. Hence with a deposits as small as $200 you can buy and sell assets worth $80,000 with Realfxm. Leverage needs to be used carefully since it’s a double edged sword it can magnify profits as well as losses.
  • Flexible deal sizes
    Forex/CFDs trading provides clients flexibility while trading, you can decide if you want to use leverage and how much you want to use. Online trading enables you to take small and odd-size lots which is normally not possible when dealing with the asset in the Stock Market or Physical Exchange.
  • High Liquidity
    There is High Liquidity at all times in the Forex market this means you can execute trades instantly. There are so many buyers and sellers in the market at all times that opening/closing deals immediately is easy and quick.
  • Access the Largest Financial market
    The Forex markets is the largest financial market in the word with a daily turnover in excess of $3 billion, the market was earlier not open to small traders and was reserved only for Banks, large hedge funds and very wealthy traders. Now beginners and small traders can access and benefit from trading in this global market with low investment amounts thanks to the internet and forex brokers like Realfxm.
  • High Volatality
    The Forex market has high volatility this means throughout the day there are numerous trade setups for clients to take advantage of. Major currency pairs move an avg. of 100 - 150 pips (points) in a day this means many profitable opportunities for clients to benefit from.
  • No Expiry on Forex
    There is no expiry dates on Forex contacts which means that there is no pressure on clients to close the deal before or on a particular date. Most physical exchanges have a contract expiry date on which the deal would close even with a loss. In online trading as long as clients maintain sufficient margin in the account the deal will not expire.
  • Diverse assets to trade
    Trading in Forex and CFDs provides you access exposure to markets you may not have had access to before. It allows you to trade in various global instruments and expand your portfolio. Clients can trade in commodities, currencies, indices and shares from all across the globe all through online trading on one single platform.
  • 24 hour Market
    One of the key benefits of Forex trading is that they are trading a global market with participants from all over the globe, this enables clients to trade 24 hours a day 5 days a week at their convenience.
  • Low transaction cost
    Forex trading offers clients an unmatched benefit in terms of low cost of trading. The transaction cost to trade CFDs is very low, the clients are charged just a spread which is the difference between the Buy & Sell price this could be as low as 0.02%. On buying/selling currency of $10,000 clients could be charged as low as $2 in spread charges. We at Realfxm do not charge clients any commission apart from spreads unlike most other STP brokers.

However please note that CFD/Forex trading is high risk/high reward, and it is possible to lose your entire capital. Please be aware of the risks involved and trade wisely.

List of CFDs

CFDs are derivatives products that allow you to trade live market prices and take advantage of price movements without physically owning the underlying instrument.

There are many CFDs assets and markets that can be traded online, they are mainly

Forex

  • Forex or Currency trading is one of the most popular CFDs that is traded online as with most CFDs it gives clients an option to buy or sell currency pairs.
  • It is one of the largest financial markets in the world and has various instruments you can trade.
  • It gives you an option to trade in Major currency pairs like EUR/USD, GBP/USD, USD/JPY and also exotic currencies like USD/MXN (Mexican peso), USD/TRY (Turkish lira) which would otherwise be difficult to trade in.
  • Its geographical dispersion means that there are traders available to trade 24 hours a day except weekends.

Metals

  • Through CFDS you can also trade metals like Copper etc. and you can also trade precious metals like Gold, Silver & Platinum at much lower cost that the physical purchase of them.
  • The best part is that you can take advantage of trading them with complete peace of mind since you do not have to worry about the storage and security of the assets purchased by you and you can still profit from trading in them.
  • Many clients prefer trading precious metal CFDs for the above reason and Gold and Silver is heavily traded by many clients globally because of good returns with the hassle and risk involved in physical investment in the same

Commodities

  • Soft commodities are also available to trade through our online trading option, there are numerous commodities available like Sugar, Coffee & Crude Oil.
  • Crude oil is one of the most heavily traded commodity because of its value and demand all across the globe.
  • Similar to precious metals many traders prefer trading soft commodity like Cocoa, Sugar etc mainly to hedge their risk on price changes of the produce.
  • They do have to worry about storage or spoilage of the commodity and can hold the deals for longer periods of time which is not possible in physical purchase of the same.

Indices

  • In addition to these popular assets CFDs of major global indices in the UK, US, Europe, Asia and Australia. are the widely traded markets in the world.
  • This biggest benefits of Indices trading is that it allows people who are geographically distant to take advantage of indices of countries far away from them along with the indices of their own countries.
  • A client based in France can trade in France 40 online through the comforts of his home and in addition he can also take advantage on emerging markets he is far from by trading in the Indian indice – Nifty 50 or the UK 100 which he would not have access to otherwise.
  • UK 100 is a very popular indice for new traders and many traders also trade heavily in emerging countries indices an the Indian Nifty 50 too is popular among global traders.

Shares

  • With CFDs you can also trade in shares which is a popular trading asset class globally, shares can easily be traded through the stock exchanges but what makes trading it through CFDs popular is the global access and very low cost when compared to stock exchanges.
  • The clients have access to not only local shares but also popular shares listed across world markets, including the UK, US, European and Asia which is not possible through local stock exchanges.
  • Traditional stock exchanges are also more expensive to trade in since the investment required is high and the leverage provided is very low in comparison to trading shares CFDs online.
  • Many countries still do not have a robust and state of the art online trading platform for trading on their local stock markets when compared to those used by Forex/CFDs online brokers like Realfxm.
  • The diverse asset class and instruments provided makes Forex/CFD trading more popular and beneficial when compared to other modes of trading.This is why Forex/CFD trading online has gained such immense popularity in such a short period of time and has a global trader base across continents and countries.

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