CFDs provide the opportunity to trade across a wide range of financial markets with low deposit requirements. You can trade thousands of shares, dozens of stock indices, hundreds of Forex pairs, many cryptocurrencies, most precious metals, and energy assets using platforms like MT4 or a web-based trading platform.

  

Trading Forex, equities, cryptocurrencies, and commodities in both directions:» Opening a CFD Account

---

 

(1) Trading the Foreign Exchange Market using CFDs

• Forex Majors (EUR/USD spread usually starts at 1.1 pips)

• Forex Minors (higher spreads)

• Forex Exotics (considerably higher spreads)

 

---

Advantages and Disadvantages of Trading CFDs Compared to ECN Forex Trading

Forex is the largest market in the world, with daily volumes exceeding 4 trillion USD. CFD contracts provide an easy way to trade this vast market via MT4/MT5 or a simple web-trading platform. CFDs replicate the price movements of any currency exchange rate, making it straightforward to monitor your trades.

Here are some key advantages and disadvantages of trading Forex CFDs:

(A) Advantages:

• CFD brokers often cover the entire Forex market, offering sometimes more than 100 Forex pairs, whereas ECN brokers typically offer 30-50 pairs.

• The minimum deposit required to open a CFD account is significantly lower than that for an ECN account.

• A single CFD account allows trading in stocks, indices, commodities, metals, and energy assets, while ECN accounts usually focus on Forex trading and occasionally spot Gold and Silver.

(B) Disadvantages:

• CFD trading is generally more expensive than ECN trading due to higher spreads.

• CFD brokers operate as Dealing Desks, meaning they create a market within the market. This can lead to price manipulation and delays in order execution.

• During volatile market conditions, some CFD providers may add re-quotes to their pricing, whereas ECN brokers typically do not. This factor is especially critical for Forex scalpers and news traders.

---

 

(2) Trading Industrial and Precious Metals using CFDs

• Precious metals
• Industrial metals

---

Key Difference between Precious and Industrial Metals

• Precious metals (e.g., Gold, Silver, Platinum) do not react with oxygen.

• Industrial metals (e.g., Copper, Aluminum, Zinc, Lead) do react with oxygen.

Precious Metals

• Include Gold, Silver, and Platinum (sometimes Palladium).

• Widely used in jewelry, investment portfolios, and central bank reserves.

• Often serve as safe haven assets, especially during economic or geopolitical turmoil.

Industrial Metals

• Include Copper (widely offered by CFD brokers), Aluminum, Zinc, and Lead.

• Prices are closely tied to economic activity, particularly in sectors like housing and infrastructure.

---

Industrial Metals and the Economy

• Strong economy → higher demand for industrial metals due to infrastructure and housing projects.

• Weak economy → reduced demand.

Tip for Traders:

Monitor warehouse supply levels via exchanges like CME/COMEX and LME:

• High warehouse stocks = low demand or high production

• Low warehouse stocks = high demand or limited production

---

Gold: The Cornerstone of Precious Metals Trading

Gold has long served as both currency and investment. Roughly 156,000 tons exist globally, with only 2,500 tons mined annually. J.P. Morgan said in 1912 "Gold is money. Everything else is credit."

Characteristics of Gold

• Durability: Doesn’t corrode; ideal for long-term storage.

• Conductivity: Conducts heat/electricity better than copper.

• Applications: Widely used in electronics, microprocessors, and space tech.

Gold Demand Breakdown

 

---

Advantages of Trading Precious Metals via CFDs

(i) No Overnight Fees (on CFD-Futures)

• Trade Gold Futures CFDs to avoid daily rollover charges. Ideal for swing or position traders.

(ii) Low Minimum Deposit

• Accounts can be opened with as little as $10. A Gold CFD often requires just $350 margin per contract.

(iii) Advanced Trading Tools

• Platforms like MetaTrader (MT4/MT5) and Web-Traders provide:

  • Advanced charting

  • Historical analysis

  • Technical indicators

  • Automated strategies

---

 

(3) Energy CFDs –Trading Oil and other Energies

• Trading Oil

• Trading Natural Gas

• Trading Gasoline

---

The four main CFD energy assets are Crude Oil, Gasoline, Heating Oil, and Natural Gas.

SYMBOL	UNDERLYING ENERGY ASSET
USOil	Crude Oil (WTI)
UKOil	Crude Oil (Brent)
NGAS	Natural Gas

---

Two Crude Oil Classifications

There are two main classifications of crude oil:

(1) US Oil

US Oil refers to WTI (West Texas Intermediate). WTI is considered a light crude oil due to its low density and fewer impurities, making it a "sweet" crude. WTI typically trades one to two dollars higher than Brent.

(2) UK Oil

UK Oil refers to Brent Blend. Brent is also a sweet crude oil and is primarily refined in Northwest Europe. It is mainly used in the production of petrol.

---

Advantages of Trading Energy Assets via CFDs

These are the main advantages of trading energy assets using CFD contracts:

(i) Capital Leverage

Traders can commonly access capital leverage of up to 30:1.

(ii) Avoiding Overnight Charges

By trading CFDs on Futures, traders may avoid paying overnight charges.

(iii) Advanced Trading Platforms

CFD platforms such as MT4 offer a full set of trading orders, advanced charting tools, chart-based trading, expert advisors, and more.

(iv) Low Minimum Deposit Requirements

You can trade as little as one contract. Typically, the initial margin required for one crude oil contract is just $75. This means you can open a solid position with only a few hundred dollars.

(v) Easy Price Monitoring

CFD contracts mirror the price movements of their underlying assets. If crude oil is trading at $80, the corresponding CFD will also be priced at $80. This makes monitoring trades and placing orders easy and efficient.

---

Factors Affecting the Price of Energy Assets

The energy market is known for its high volatility. Prices are primarily driven by real-world supply and demand. When the global economy expands rapidly, energy demand increases, pushing prices higher. Overall, the price of energy is influenced by several factors, including:

(1) Global economic conditions

(2) Political and environmental developments

(3) Crises or wars in major oil-exporting countries

(4) Technological innovations that can replace existing energy sources

(5) The value of the US dollar — since energy assets are priced in USD, a rising dollar often leads to falling energy prices to maintain relative value

(6) Production costs

---

Gathering Information and Reports on the Energy Market

News outlets such as Reuters, CNNfn, and Bloomberg provide in-depth coverage of the energy market. Additionally, oil traders can refer to the American Petroleum Institute (API) Report for key data. This report is released weekly, typically on Wednesdays.

» American Petroleum Institute (API Report)

---

Technical Analysis in Energy Trading

Technical analysis plays a key role when trading energy assets. Here are some commonly used tools and techniques:

(a) Support & Resistance Levels

These are essential for identifying medium-term trends. Traders use them to determine key price zones where energy assets may reverse or consolidate.

(b) RSI (Relative Strength Index)

The RSI is useful for timing market entries and exits. Traders often rely on RSI levels to detect overbought or oversold conditions. (Learn more about RSI precision for improved timing.)

(c) MACD (Moving Average Convergence Divergence)

MACD signals, especially on monthly charts, are valuable for identifying long-term trend shifts and momentum.

(d) Other Technical Tools

Additional indicators such as CCI (Commodity Channel Index), Stochastics, and Bollinger Bands can also be effectively applied to energy trading strategies.

 

 

---

(4) Trading Shares using CFDs

• Blue Chips

• Mid-Caps

• Small-Cap Stocks

---

Share CFDs are financial instruments that replicate the price of a particular stock while offering several advantages, such as capital leverage and potential tax exemptions. CFD providers offer access to shares from markets across the globe:

• US / Canadian Shares

• European Shares

• Asia / Oceania Shares

• South American Shares

Let’s consider an investor who wants to trade Apple stock (AAPL) ahead of the release of a new iPhone. This trader aims to buy 500 shares of AAPL, worth $85,000, with the current price at $100 per share. He has two options:

(A) Buy 850 shares of Apple directly through a stockbroker. Assuming the broker provides 2:1 leverage, he would need to deposit at least $42,500.

(B) Buy a CFD on Apple stock. With CFD leverage up to 30:1, he would need to deposit only a few thousand dollars.

Comparison of the Two Options:

1. The margin requirement is significantly lower with CFDs.

2. However, using high leverage with CFDs increases trading risk.

3. CFD positions may offer tax advantages not available with traditional stock ownership.

---

Key Features of Trading Share CFDs

1. Ownership: Opening a Share CFD position does not make you the actual owner of the share, meaning you are not entitled to vote at shareholder meetings.

2. Dividends: Some Share CFDs are structured to pay dividends, while others are not. Always check your broker’s policy.

3. Corporate Actions: In the event of a stock split, the same changes apply to the CFD contract. For example, if each share is split in two, each CFD contract you hold will be duplicated accordingly.

4. Tax Benefits: CFD trading may offer exemptions from certain taxes, depending on your jurisdiction.

5. Bidirectional Trading: Share CFDs allow you to trade in both directions—profit from rising or falling markets.

---

Dividend Policy

Public companies typically pay annual dividends to shareholders. On the ex-dividend date, the dividend amount is deducted from the share’s market price. If you're holding a CFD position during the ex-dividend date:

• If Long: You receive the dividend.

• If Short: You pay the dividend.

This is typically a neutral effect, as the dividend adjustment compensates for the corresponding price change of the underlying stock.

---

Share Trends and CFD Futures

Shares can be highly volatile. A listed company’s value may change dramatically due to various factors such as mergers, acquisitions, patent approvals, or new licenses. From a technical analysis standpoint, shares tend to follow clear trends.

Traders can benefit from these trends by using leveraged CFDs. Additionally, mid-term traders can open positions on CFD Futures, which do not incur overnight charges. A CFD on Futures is typically valid for 2–3 months, allowing position holding without additional costs.

To profit significantly using this approach, a trader must:

1. Identify a strong, consistent trend

2. Avoid being stopped out prematurely

---

What Affects the Valuation of Share CFDs?

(1) The Value of the Underlying Company

The fundamental driver of a share's value is the company’s ability to generate earnings and cash flow. Profitable companies issue dividends, which attract investors. Analysts use various financial ratios to evaluate shares, including P/E, PEG, P/BV, and P/S.

(2) General Market Conditions

Bullish or bearish market sentiment can significantly affect share valuations. For instance, during bullish periods, shares may trade at inflated ratios such as P/E = 500 or P/S = 30.

(3) Currency Risk When Investing Abroad

If you trade a share listed on a foreign exchange, its price will be impacted by the relevant currency exchange rate. The value of your position is therefore subject to currency fluctuations in addition to market price changes.

---

 

(5) Equity Index CFDs

• Dow Jones Industrial (US30), S&P 500 (US500), Nasdaq (US100)
• European and Australian Stock Indices
• The Dollar Index (USDX)

---

Speculation and Hedging

By trading Index CFDs, investors can either speculate on market trends or hedge their portfolios against broader market risk.

• (i) Speculation: Take advantage of market trends—whether bullish or bearish.

• (ii) Hedging: Protect your existing share portfolio from general market fluctuations.

---

Trading CFDs on Indices

Index trading enjoys deep market liquidity, which translates into tight spreads and low trading costs. This is especially beneficial for news traders, day traders, and scalpers.

---

News Trading

Indices usually behave more predictably during major news events, unlike Forex pairs which often show erratic and misleading movements before settling into the direction influenced by the news.
This makes it easier to use tighter stop-loss orders without getting prematurely stopped out—an advantage for short-term traders during high-impact news releases.

---

Swing Trading

Swing trading is one of the most efficient methods for trading stock markets. Positions are held from a few days up to a few weeks.
CFDs, with their built-in leverage, can amplify small moves—turning a 1–10% price change into a 50–500% return on contract value.
Moreover, if you're trading CFDs on Futures, there are no overnight SWAP fees. This means you can hold a long-term position on indices like the Dow-30 or S&P 500 for weeks, without incurring overnight costs.
The key to success in swing trading is proper trend identification and smart stop-loss placement—ideally beyond two major support or resistance levels.

---

Hedging Against Market Risk

If you're holding individual stock positions, you're inherently exposed to market-wide risk.
Index CFDs offer a convenient and effective way to hedge against this exposure.
Since index CFDs track the broader market, they allow traders to protect their portfolio from unexpected macroeconomic or geopolitical shocks—without needing to exit their core positions.

---

Understanding the Stock Indices You Can Trade via CFDs

A stock index represents the collective price movement of top publicly traded companies within a given market.
For example:

• Dow-30: Tracks 30 of the most influential US companies

• FTSE 100: Tracks the top 100 companies on the London Stock Exchange

Here are some major global indices available for CFD trading:

• US Markets: Dow Jones Industrial, Nasdaq, S&P 500, Russell 2000

• European Markets: German DAX, France CAC-40, Euro Stoxx 50, UK-100

• Asian Markets: Hang Seng, Nikkei 225 (Japan), ASX 200 (Australia)

---

How Are Stock Indices Calculated?

There are two main methodologies for calculating index values:

• (i) Capitalization-Weighted Average

  Most indices use this method. The greater a company’s market capitalization (price × number of shares), the more it influences the index.

• (ii) Price-Weighted Average

  The Dow Jones and Japan’s Nikkei use this approach. Higher-priced shares have a larger impact on the index, regardless of company size.

---

Testing Strategies on the Dow-30

A practical tip for traders: always test your equity trading strategies on the Dow-30 Industrial Average first.
If a strategy does not perform well on the Dow-30, it’s unlikely to work effectively on other indices.
This is a valuable lesson for beginners who want to avoid wasting time and capital on weak systems.

---

 

Comparing CFD Brokers

The following brokers have been active in the market for over 10 years, are fully regulated by recognized financial authorities, and maintain segregated client bank accounts to ensure fund safety.

CFD PROVIDER	ASSET CLASSES	TRADING PLATFORMS	TRADING ACCOUNT	WEBSITE
■ IC MARKETS   Foundation: 2007 License:  FSA (Seychelles) SEGREGATED CLIENT ACCOUNT: YES SWAP-FREE ACCOUNTS: YES US/EUROPEAN TRADERS: NO ► IC Trading for European Traders	CFD Provider · Forex · Soft Commodities · Precious Metals · Energies · Shares · Indices	■ MetaTrader4 ■ MetaTrader5 ■ cTrader ■ WebTrader   AUTO-TRADING: YES SCALPING: YES Free VPS Server for deposits of more than $5,000	$200 Minimum Deposit Amount   ■ DEPOSIT METHODS Wire | Cards | Skrill Neteller | WebMoney	Not for European Traders: ► IC Markets Website (Not allowing European Traders) Note that European Traders are allowed by IC Trading: ► IC Trading (European Traders)
■ ROBOFOREX   Foundation: 2009 REGULATION: IFSC, license IFSC/60/271/TS SEGREGATED CLIENT ACCOUNT: YES SWAP-FREE ACCOUNTS: YES	· Forex · Cryptocurrencies · Soft Commodities · Precious Metals · Energies · Shares · Indices · ETFs	■ MetaTrader4 ■ MetaTrader5 ■ cTrader ■ WebTrader   AUTO-TRADING: YES SCALPING: YES Free VPS Server	$10 Minimum Deposit Amount Social Trading WELCOME BONUS: $30 ■ DEPOSIT METHODS Wire | Cards Neteller | Skrill AdvCash | PerfectMoney	Open Account: ► RoboForex Website

 

■ CFD Trading Tutorial

CFDagent.com