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CFD trading is where a buyer and a seller enter an agreement to exchange the difference between the value of an asset at the time the contract opens and when it closes.

CFD traders do not own the underlying asset, which is a key point of difference from traditional share trading. Instead, traders are essentially speculating on an asset’s price either rising or falling.

CFD trading is done on margin, meaning traders only have to put up a percentage of the position’s value rather than its entire worth. If a trader thinks an asset’s value will rise, they can open a buy position.

If their prediction proves correct, they can choose to close the contract and sell, thus making a profit. By contrast, if the price falls below what they paid, they need to make a decision over whether to close the contract and accept their losses or hold and see if the value recovers.

On the other hand, if a trader believes an asset’s price is due to fall, they can open a sell position. If the market trends as they forecast it would, they’ll make a profit. But if the asset’s value confounds their expectations and rises, they will stand to make a loss.

Before you start, it’s vital that you have a deep, extensive understanding of what CFD trading is. Most successful CFD traders are vastly experienced operators with well-formed strategies that have been honed over a number of years, so it’s important to conduct plenty of research and analysis prior to taking steps into the world of online CFD trading.

As with any form of trading, there are opportunities for reward but there are also risks involved. For example, because CFD trading is done on margin, professional clients could stand to lose more than the initial capital they put up to take a position.

Our most popular CFD trading platform works on an ECN model, where there is no dealing desk and trades are always executed at the best possible price. With an ECN account, traders are charged a small commission on their trades. We also provide an STP account where that commission is already built into the spread to keep pricing simple.

Our CFD trading platform enables you to trade a number of instruments including forex, shares, commodities, indices and cryptocurrencies*. There is a minimum deposit of £300, $300 or €300 and demo accounts are available to allow you to get a feel for online CFD trading.

CFD trading is complex and comes with a high risk of losing money due to leverage. Most successful CFD traders are vastly experienced veterans who have honed their skills over years of operating in the markets.

Being new to CFD trading doesn’t mean you won’t be a success. What’s important is defining what that success looks like and how you plan to achieve it. You need to take your emotions out of the equation and make cold, calculated decisions based on your in-depth analysis and research. If you manage your expectations and form a strategy that enables you to mitigate any losses that you may incur, you too can discover a formula for how to trade CFDs successfully.