CFD Trading Strategies

CFD Trading Strategies
CFD Trading - an in-Depth Analysis

There are many reliable strategies traders can use when choosing CFD trading. CM trading will guide you through the many benefits of CFD trading and much more.

What is CFD Trading?

CFD trading, or Contract for Difference trading, allows you to trade on the instrument's movement rather than the instrument itself. CFD offers one unique benefit- you can gain profits when the price goes up as well as when it goes down, that is, if you predicted correctly and bought accordingly.

If you believe a rise in the price of the underlying instrument is coming up, you can go ‘long’ and buy. This allows you to profit on the coming rise. If you believe the price will fall, you go ‘short’, and when the price falls, you will still profit from the correct prediction.

CFD trading offers a different approach to trading, because you can sell short. The gains and losses will depend on how accurately you predict the movements, the size of your lot (‘position’) and how significant the market movement actually is.

CFD trading is fairly similar to the Forex market. Many brokers and trading platforms also allow leveraged buying and selling for CFDs, a CFD strategy that can pay off handsomely if used correctly.

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What markets can you trade CFDs on?

You can trade CFDs on the following markets:

  • Forex
  • Commodities
  • Shares
  • ETFs
  • Indices

In general, CFD trading works the same way on any of the above platforms, although it's still best to familiarize yourself with each and every platform, as they are all a bit different from one another.

The Advantages of CFD Trading

  • One of the main advantages of CFD trading, and the reason why it's becoming so popular, is that you can profit both when the market goes down and when it goes up. You can sell short and still make a profit.
  • CFD trading also allows you to use leverage, i.e. enter the market with only a fraction of the cost of the actual transaction.
  • Convenience and the lack of a fixed lot size also cause many traders to choose CFD trading. As you don't own the actual commodity, the risk is immensely reduced.
  • As with most financial strategies, CFD trading offers a good opportunity for portfolio diversification, which is always good.

Excited? Test your CFD strategies and start trading CFDs with CM Trading today!

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Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.

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