What is CFD trading on Deriv (ex-binary.com)?

Forex and CFD on Deriv

Foreign exchange trading provides a large number of profitable methods, including trading currency pairs, indices, and precious metals.

CFD is one of the most popular trading tools.

CFD stands for Contract for Difference and is based on the underlying asset.

This can be stocks, indices, and other commodities. When trading CFDs, traders can profit from price fluctuations.

CFD trading operates according to the following principles: You select an asset and predict the direction of its price movement. If your forecast is accurate, you will make a profit.

For example, you believe that the US Wall Street Index 30 Index (US30) will rise and enter a CFD contract with a higher price.

If the transaction ends according to your idea, that is, the index has risen, the broker will pay the difference between the current price and the opening price.

A feature of CFD is that you will trade the price of the asset rather than the asset itself.

That is, the trader makes a profit through the price of the underlying asset without having to own the asset itself.

A contract for difference is a derivative financial instrument based on changes in the price of the underlying asset.

At the same time, it will not grant any rights to the ownership of the asset.

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History of CFD market

CFDs first appeared in England in the 1990s to avoid stamp duty.

Because this type of transaction does not involve owning shares, it will not be subject to stamp duty.

Hedge funds first began to use this trading tool, and soon it was also available to retail traders.

At the time, transactions only involved the purchase and sale of the difference in stock value.

Today, brokers provide CFDs on almost all commodities.

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Why trading CFDs can be profitable?

CFD trading is very common. Its advantages are:

• You can trade on an asset without owning it and profit from the price difference.
• CFD is a useful trading tool for both long-term investment and short-term investment.
• You can profit from a variety of assets: stocks, precious metals, indexes.
• The trading cycle is unlimited, and the contract can be ended at any time.
• Because you can choose long-term or short-term, CFDs can be used for hedging.
• CFD transactions need to be based on margin and currency in foreign exchange transactions. There is no need to have a huge initial capital to conduct a transaction.

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