This article aims to guide traders towards the right path to start and enter the day trading business.
The goal of CFD trading is to speculate on the movements of the underlying assets without actually owning them. Some are genuine, while others are fraudulent. Some allow you to make more significant profits at a higher risk, while others will enable you to make smaller profits at a lower risk. Some prefer to refer to CFDs as a transaction between the investor and the broker.
It’s probably best to illustrate with an example, so here we go. Suppose the assets in this example are stocks, you buy stocks of company X for £30 per share. 200 shares at the cost of £6,000. If you bought the shares at a regular stock exchange, the cost is much higher, usually close to 500% more.
It is possible to trade through CFDs on treasuries, indices, currencies, and commodities. The margin requirements for CFDs can not exceed 20%. Trading with higher leverage allows for greater profits with a lower capital outlay. Some CFD brokers may not even charge you a fee if they trade your CFDs for you. Others charge fees, but these are usually pre-established.
Investing in CFDs is not mutually exclusive from traditional stock markets. CFD trading is generally less regulated, and you can open an account for as little as £1,000. Trading on Wall Street with CFDs will offset losses made on closed markets.
CFD brokers are classified into direct market access (DMA brokers) and Market Makers (MM brokers). DMA brokers always charge a commission, and their commission is higher than MM brokers’ commission. A DMA broker will usually charge you a fee for data transfer. The minimum deposit for an account is £1,000, but it could be more, so it depends on you and how much money you’re willing to deposit. If your broker accepts electronic payments, it would be the most innovative and most straightforward option.
The next thing you should think about is platforms or the range of supported devices. Platforms used by different brokers may differ. Some provide browser-based platforms, while others only offer desktop and mobile apps. Examine whether the broker is regulated by the monetary authorities of the country in which he operates. The withdrawal time may vary – it could be three, five, or even more days.