eToro is a CFD broker. But what is CFD and how to start trading it?

Type of CFDs you can trade with eToro

Contracts for Difference (CFD) is a professional and popular over-the-counter (OTC) financial product that allows you to easily hold a wide range of market profits in a variety of different financial markets (including stock indexes, commodities, metals, etc.).

As long as you log in to eToro, a trading platform, you can trade CFD and foreign exchange at the same time.

Stock Index

eToro provides traders with a wide range of major global stock market indexes through eToro’s cash index CFD products. You can trade S&P 500, Dow Jones, SPI200, DAX, FTSE, Hang Seng, Nikkei Wait.

Commodity

eToro provides traders with convenient ways to trade commodities, such as crude oil, gold and silver. Energy, metals and agricultural products belong to three categories of commodities.

Gold & Silver

eToro allows you to trade gold, silver and other popular metals in spot contracts of various contract sizes.

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How one makes profit by trading CFDs?

A CFD is a leveraged derivative that allows you to trade based on real-time market price changes without actually holding the contract.

Regardless of whether the underlying market is rising or falling, you can use CFDs to speculate on the future trend of market prices (long or short).

If the price of a stock is US$25.26 and 100 shares are bought at this price, the transaction cost is US$2,526.

For traditional traders, a 50% margin is required. This transaction requires the trader to pay at least US$1,263 in cash.

For CFD brokers, usually, only 5% margin is required, so the transaction only needs 126.30 US dollars in cash to enter the market.

If the underlying stock continues to appreciate and the stock reaches the purchase price of US$25.76, you can sell the stock to get a return of US$50 or US$50/1263 = 3.95% of the profit.

Or, if you hold a CFD on stock, when the price of the underlying stock is $25.76, the CFD gain is estimated to be = 39.5% of return on investment.

Invest in CFDs with eToro

Why people often trade CFDs?

Regardless of whether the underlying market is rising or falling, you can use CFDs to speculate on the future trend of market prices.

You can go long (buy) or short (sell), allowing you to profit from falling prices, or you can hedge your portfolio to offset any potential loss in the value of your physical investment.

You can access markets that may have been inaccessible before.

eToro provides prices for foreign exchange, metals, indices, commodities, etc.

Open eToro CFD Trading Account

Cost of CFD trading – Fee and Commissions

The spread is the difference between the buying price and the selling price. If you think the price will fall, use the selling price, and if you think it will rise, use the buying price.

Example: If you look at the Australian 200 Index price, it might look like this:

Australia 200 Index 5069/5070

If you think the Australian 200 Index will appreciate, please buy at 5070.

If you think Australia 200 will depreciate, sell it at 5069.

In this example, the spread of Australia 200 is 1 point.

As with traditional trading, the price of a CFD is to buy (“bid” the price at which you are long) or sell (“bid” the price at which you sell short); the price of a CFD includes the price of the underlying instrument, eToro will charge you a small handling fee or overnight interest for each transaction of.

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