Investing in CFDs on shares of well-known companies of the world
CFD is an abbreviation of Contract For Difference. CFD is a financial instrument that allows you to speculate on the difference in the prices of the main asset, which are shares or any other instruments.
When trading CFDs, the security or precious metal itself is not purchased. That is, the trader does not receive a part of the company or a physical unit of the precious metal for management. On the one hand, this is a minus. However, a pleasant surprise of CFD trading may be that the trader does not have additional obligations in connection with the ownership of the stock.
The opportunities for both buying and selling also apply to CFDs. For example, to make money on the fall in the price of the main asset, a CFD contract is sold.
What stocks have become available for trading?
Recall that the work is carried out not by the securities themselves, but by contracts for the difference in their prices.
Margin leverage and other conditions for trading with CFDs
Trading contracts for difference is marginal in nature. This means that a trader can trade CFDs with volumes several times higher than his margin collateral.
Read more: What is a Leverage in Forex
Commissions and spreads are also characteristic of CFDs. The spread is a natural market phenomenon, namely the distance between the nearest prices of buyers and sellers. Every trader who has ever traded currency instruments or already existing ones on the CFD platform is well familiar with spreads.
The transfer of an open position to the next day also entails the write-off or accrual of swaps. The swap table can be found on this page.
Time of trading CFDs on shares
Since real shares are traded on physical exchanges, their trading time is limited by the working time of the exchange. This means that, for example, when trading CFDs on Google shares, you need to focus on the working hours of the NASDAQ exchange.
Shares of other IT companies - Apple, Microsoft - are also listed on NASDAQ. But IBM is already trading on the New York Stock Exchange - NYSE, which is open from 9.30 to 16.00 local time. NASDAQ also operates during these hours.
It is important to remember that exchanges are closed and opened every working day. This means that there is a high probability of gaps - 5 times a week. To prepare in advance for possible price gaps, it is worth following the release of economic news.
Read more: What is the New York Stock Exchange (NYSE)
Dynamics of stock prices
A new tool in a trader's portfolio is always a good thing, because stocks, for example, show a different price dynamics than currency pairs. The new price dynamics makes it possible to apply other trading strategies.
As for the time horizons of trading, CFD speculation can be performed on both weekly and minute timeframes, and everything in between. CFD per share is the same instrument, in terms of trading opportunities, as a currency pair. Therefore, both short-term trading and long-term being "in the stock" are possible.
The stock market differs from the foreign exchange market by a smaller volume, but a large variety of instruments, as well as by centralization. An important feature of the stock market is that companies whose shares are traded on stock exchanges are grouped into sectors, for example: banking, IT, automotive, oil production, etc. This division into sectors directly determines the trading strategies applied to stocks. For example, some popular strategies involve multidirectional trading in shares of one sector to insure against risks across the sector, or multidirectional trading in different sectors to insure against risks across the market as a whole.
Read more: The main components of a Trading Strategy
Stock chart analysis
For the first time, technical analysis was widely used in stock markets. Then, with the advent of the Forex market, he continued his development on currencies that were more popular among traders for technical reasons.
Trading algorithms and Stock markets
For advanced traders who have a deep understanding of manual trading on other instruments, the appearance of CFDs means new niches for their robot trading algorithms.
Read more: Trading robots on the stock market