What is CFD Trading And Stock CFD?

stock CFD

CFD are financial products derived from stocks and contain high leverage effects. They are an effective way to buy and sell stocks, indices, and futures. The London Stock Exchange has a history of 200 years. In 2000, the United Kingdom launched the British stock CFD. By June 2019, it was only about 19 years. The CFD trading volume of stock CFD has already accounted for the London Stock Exchange. 25% of the total. What wealth opportunities can CFD bring? First, domestic investors can easily enter the international market and have CFD trading positions in different markets. Second, overseas markets will provide better liquidity. Third, diversifying funds in different markets in different countries will not be unduly affected by unfavorable fluctuations in a single market. “

Introduction of CFD

Contracts for Difference (Contracts for Difference, CFD) can reflect the price changes of stocks or indexes and provide profit or loss caused by price changes without actually owning stocks or index futures. CFD on CFD is traded on margin. Like physical stock trading, profit or loss is determined by your buying and selling prices.

Basic Definition CFD trading

CFD is currently the most common CFD trading tool that domestic residents have heard of. The definition of CFD in the Reuters Financial Dictionary is as follows: generally refers to the exchange of physical commodities or securities.

Only the difference between the settlement price and the contract price as a cash settlement of transactions. In fact, in order to control the risk of CFD and curb excessive speculation, financial management institutions in various countries require that brokers or banks trading CFD must have 100% margin, that is to say, no matter how the customer pays the margin, for customer transactions, The broker or bank must have 100% of the amount of currency as a guarantee.

For example, the financing ratio provided by the broker to the customer is a 5% margin, which means that the customer only needs to pay 500 yuan to make a transaction of 10,000 yuan, but for banks or brokers, it must have 10,000 yuan available for CFD trading.

1. Function Transformation

CFD appeared in the 1970s and became a relatively mainstream CFD trading product in 2000.US crude oil contract price difference CFD appeared in the form of swap transactions, and in the 1980s it was mainly concentrated in transactions between banks and large institutions. 

It officially traded in overseas retail markets in 1999 and launched UK stock CFD in the UK in 2000.CFD was originally just a tool for large institutions to effectively avoid securities risks. Now, it has become a common investment tool for global retail investors.

More and more retail customers use CFD as part of their trading portfolio to obtain a substitute for physical stock trading. CFD trading using CFD investors include frequent trading of short-term traders and those looking for alternative financing can stock trading more flexible trading tool of long-term investors.

CFD Trading Investment Tools

CFD is an efficient way to buy and sell stocks, indices, futures, and other commodities. CFD is bought and sold at the price of a certain commodity and does not involve the transaction of the commodity entity. Therefore, the contract for difference (CFD) does not have the settlement and settlement restrictions like futures trading. Some people call it current futures. 

CFD commodities can theoretically be everything with floating prices, including national indices, foreign exchange, futures, stocks, precious metals, and other commodities. Some formal foreign exchange platforms are now able to trade these commodities for CFD trading, such as easy-forex, FXCM, and so on.

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