When you first open an account you may be confused about which type to choose from, be it spread betting, cfds or forex. The best thing to do is to choose one according to your own specific circumstances, for instance the country you're from and the type of trading you want to implement. Ideally, your broker will be best fit to decide this for you, so it is worthwhile seeking their advice when it comes to choosing an account.
Always have a read through the terms and conditions. If you decide to take a bonus, make sure you understand and are fully aware of the bonus requirements.
Remember, when CFD Trading you can:
Trade in rising or falling markets
Your profit or loss is calculated by the difference in the opening price and closing price of the product your trading, which means you are free to buy or sell from the offset.
Going Long - an example of buying a CFD:
You believe that due to certain economic or geopolitical factors the price of oil is going to rise in the next month. The current price of WTI Crude Oil is 99.93 - 100.00. For every 1 contract you buy or sell, the equivalent is 100 barrels of oil. Meaning each time the price of oil moves one cent, it is equal to a $1 move per contract held. This means if you speculate that oil prices will rise and you buy 10 contracts. Your position size will be 100.00 (the buy price) x 10 (amount of contracts) x 100 = $100,000.
You now have an open position. You are holding 10 Contracts in WTI Crude Oil with a total position value of $100,000.
2 weeks later, global demand has increased and now Oil is trading at 102.00 - 102.07. If the margin at the time was 5% the amount of deposit required to cover the trade would be $100,000 x 5% = $10,000.
You decide to lock in your profits and sell at the current price of 102.00. You sell $102.00 (the price of oil now) x 10 (amount of contracts) x 100 = $102,000.
To calculate your net profit you simply subtract $100,000 from $102,000 and you are left with $2000 profit.
Bear in mind there are no hidden financial costs or commissions when you are trading oil or any of the other commodities, they are already contained within the price itself.
|Created||19 Dec 2019|
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