CFD Trading Tutorial

CFDs offer the opportunity to trade in any financial market with low deposit requirements. You can trade thousands of shares, tens of stock indices, hundreds of Forex pairs, many cryptocurrencies, most precious metals, and most energy assets via MT4 or a web trading platform,

 CFDs offer the opportunity for trading in every financial market in the world with low deposit requirements...


CFDs allow investors to trade Forex, equity, and commodity assets, in both directions. » Opening a CFD Account

(1) Trading the Foreign Exchange Market using CFDs

  • Forex Majors (EURUSD spread usually starts at 1.1 pip)

  • Forex Minors (higher spreads)

  • Forex Exotics (considerably higher spreads)

Forex is the largest market in the world with daily volumes of more than 4 trillion USD. CFD contracts offer an easy way to trade this vast market via MT4/MT5 or a simple web-trading platform. CFDs mirror the price behavior of any currency exchange rate, and thus, monitoring your trades becomes an easy task.

Advantages and disadvantages of trading CFDs compared to ECN Forex trading

Here are some advantages and disadvantages when trading CFDs on Forex:

(A) Advantages:

  • CFD brokers can cover the whole Forex market by offering sometimes more than 100 Forex pairs, while ECN brokers offer usually 30-50 Forex pairs
  • The minimum deposit requirement when opening a CFD account is considerably lower than opening an ECN account
  • In a single CFD Account, you may also trade Stocks, Indices, Commodities, Metals, and Energies. On the contrary, ECN accounts offer only Forex trading, plus usually Gold and Silver Trading (on spot).

(B) Disadvantages:

  • CFD trading is more expensive than ECN trading (higher spreads)
  • CFD brokers operate as Dealing-Desks and that means they create a market within a market. The disadvantage here is price manipulation and delays in order execution
  • During volatile markets, some CFD providers may add re-quotes on their pricing models. On the other hand, ECN brokers do not impose re-quotes on pricing. This is important for Forex scalpers and news traders.



(2) Trading Industrial and Precious Metals using CFDs

  • Trading Gold, Silver, and Platinum

  • Trading Copper and other Industrial Metals

There are two main categories of metals, industrial metals, and precious metals.

  • A key difference between these two categories of metals is that precious metals do not react with oxygen while industrial metals do react with oxygen.
  • The three major precious metals include gold, silver, and platinum. CFD brokers offer these three precious metals, and some of them also palladium.
  • The primary industrial metals include copper, aluminum, zinc, and lead. CFD brokers usually offer only copper.

Industrial Metals versus Precious Metals

The price of industrial metals reflects the overall state of our world’s economy. The stronger the economy, the higher the investment in building new houses and infrastructure. The higher the expenditure for housing and infrastructure, the higher the demand for industrial metals. But as concerns precious metals this is not always the deal. Precious metals tend to trade within longer cycles that usually last a decade. Precious metals are used as investment assets (35%) and as raw materials for jewelry (45%). Normally they should reflect the general conditions of the world’s economy. But on the contrary, the price of precious metals tends to peak during a financial or political crisis, wars, etc. Gold is seen by investors as a ‘safe haven’ during an economic crisis.

Industrial Metals and Major Exchanges Warehouse Suppliers

Traders of industrial metals may use a simple technique in order to evaluate the real supply and demand for a particular industrial metal. The two major metal exchanges (COMEX/CME and LSE) offer information about warehouse supplies.

Therefore by examining the available stock:

(i) If the stock levels are higher, then the demand is lower or the production is higher

(ii) If the stock levels are lower, then the demand is higher or the production is lower

The Importance of Gold

Gold is by far the most important precious metal for both trading and investment purposes. In total, there are about 156,000 tons of Gold available today, while only 2,500 tons are mined yearly. Gold has been the dominant currency for exchanging goods and services since the beginning of civilization.

J.P. Morgan said in 1912: "Gold is money, everything else is credit"

The Main Characteristics of Gold as a Precious Metal

Here are some key characteristics of Gold:

(1) Gold has unique characteristics as a metal

  • Gold durability over time is extraordinary as it doesn't corrode
  • Gold may conduct heat and electricity better than copper

These two characteristics make gold an ideal metal for electronic applications (mobiles, microprocessors, etc.)

(2) Gold as a Hedging Tool against Inflation

Gold acts historically as a hedging instrument against inflation. As the US dollar falls in value due to inflation, gold which is priced in US Dollars gains value respectively. The historical price of gold helps economists to calculate past values in today’s prices.

(3) High Demand for Gold from Jewellery

Jewelry as an industry is the traditional buyer of Gold. The demand for Jewellery accounts for 45% of the aggregate demand for gold each year.

(4) Gold is highly used as a Reserve Currency

Every Central Bank in the world uses Gold as a reserve currency. Moreover, commercial banks, investment firms, and many individual investors include gold assets in their portfolios. The existence of Gold in a portfolio enhances portfolio diversification and reduces risk.

Aggregate Demand for Gold

Here is the basic distribution of the aggregate demand for gold:

(A) Jewelry (45.00%)

China and India count for 50% of the total demand for Jewellery Gold.

(B) Investment Gold (35.00%)

The demand for investment gold counts more than 1/3 of the total demand for gold.

(C) Central Banks (10.00%)

Central banks traditionally use Gold as a Reserve Currency.

(D) Industrial Applications (7.00%)

This category of demand includes mainly applications in the electronics industry, but also fuel cells and the space industry.

(E) Other Demand (3.00%)

This includes demand from other sources, for example, gold for dental applications, etc.

Advantages of Trading Gold and Silver via CFDs

Here are some key advantages when trading precious metals via CFDs:

(i) Pay no Overnight Rates

If you trade gold via CFD-on-Futures you do not pay overnight rates. The spread is a little bit higher than CFD-on-Cash, but if you plan to keep your positions for weeks you can save tons of money by trading on CFD Futures.

(ii) Low Minimum Account Requirements

Most CFD brokers provide very low deposit requirements, and you can open an account with just $10. Note that trading a CFD contract of gold usually requires an initial margin of $350 in your account.

(iii) Trading by using Advanced Charting Capabilities

CFD brokers offer a wide selection of trading platforms including Web-Traders, MetaTrader, and Mobile Traders. Trading gold via MetaTrader is very useful as you may use advanced charting capabilities, technical analysis, historical back-testing, trading-on-charts and etc.


(3) Energy CFDs –Trading Oil and other Energies

  • Trading Oil CFDs

  • Trading Natural Gas

  • Trading Gasoline CFDs

The four main energy assets available for CFD trading: Crude Oil, Gasoline, Heating Oil, and Natural Gas.




Crude Oil (WTI)


Crude Oil (Brent)


Natural Gas

Two Crude Oil Classifications

There are two main crude oil classifications:

(1) US Oil

US Oil is referring to WTI (West Texas Intermediate). The WTI is considered light. The light density along with fewer impurities makes WTI a sweet crude oil. WTI typically trades a dollar or two higher than Brent.

(2) UK Oil

UK Oil is referring to Brent Blend Oil. The Brent Blend is a sweet crude oil too and is refined in Northwest Europe. Brent is mainly used in the production of petrol.

Advantages when Trading Energy Assets via CFDs

There are the main advantages when trading energy assets using CFD contracts:

(i) Capital leverage

Traders can commonly use capital leverage up to 30:1

(ii) Avoid paying overnight charges

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

(iii) Advanced Trading Platforms

CFD trading platforms such as MT4 provide many advantages (full set of orders, advanced charting, trading-on-charts, expert advisors, etc.)

(iv) Minimum Deposit Requirements

You may trade as little as 1 contract. Usually, the initial margin required for 1 contract of Crude Oil is just $75. Therefore you can open a decent position with as low as a couple of hundred bucks

(v) Easy-Monitoring of Prices

CFD contracts imitate the price behavior of their underlying assets. If the price of crude oil is $80 then the price of the Crude Oil CFD is also $80. Trades can be easily monitored and placing orders becomes a very easy and fast process.

Factors Affecting the Price of Energy Assets

The energy market is characterized by high volatility. The price of energy assets is mainly defined by the real supply and demand for energy assets. When the global economy is growing fast then the demand for energy is getting stronger and the prices are moving higher. In overall, the price of energy is affected by numerous factors, including:

(1) Conditions in the global economy

(2) Political and environmental factors

(3) Crisis or war in the major oil-exporting countries

(4) New technologies that can substitute existing energy assets

(5) The Price of the US Dollar, as energy assets are priced in USD. When the USD rate goes up the energy assets priced in USD must go done to offset the differential in the final value

(6) Cost of Production

Gathering Information and Reports Regarding the Energy Market

News portals such as Reuters, CNNfn, and Bloomberg offer extended reports about the energy market. Oil traders can use also the American Petroleum Institute (API Report) to gather information. This report is released weekly, on Wednesdays.

» American Petroleum Institute (API Report)

Technical Analysis

Technical analysis is important when trading energies, for example:

(a) Support & Resistance Levels (for identifying mid-term trends)

(b) RSI can be used for entering/exiting the market (Learn about RSI Precision)

(c) MACD signals on the monthly

(d) Other technical analysis tools may apply as well (CCI, Stochastics, and the Bollinger Bands)



(4) Trading Shares using CFDs

  • Blue Chips, Mid-Caps, and Small-Cap stocks

Share CFDs are financial instruments that mirror the price of a particular share by offering several advantages such as capital leverage and tax exemptions. CFD providers offer shares from all around the world:

  • US / Canadian Shares

  • European Shares

  • Asia / Oceania Shares

  • South-American Shares

Let’s suppose that an investor wants to trade Apple stock (AAPL) before the release of the new iPhone. This trader wants to buy 500 shares of AAPL worth $85,000. The Apple share is trading at $100. He has two options in order to trade the Apple stock:

(A) He can buy 1,000 shares of Apple directly from his stockbroker. In this case, he will have to deposit at least $43,000 as his stockbroker offers him 2:1  capital leverage.

(B) He can buy a CFD on Apple Stock. In this case, he could use leverage up to 30:1 and he would have to deposit a few thousand dollars.

Comparing the two options

(i) The difference in the margin requirement is great, in favor of the CFD

(ii) In the case of a CFD, the use of high capital leverage would increase the trader's risk significantly

(iii) CFD position offers tax exemptions


These are some key features when trading Share CFDs:

(1) Opening a position on a Share CFD does not make you the real owner of the underlying share, and therefore, you are not entitled to vote at the company’s meetings.

(2) Some Share CFDs are designed to pay dividends, others not, check below for more information.

(3) In the case of a share split, whatever happens to the underlying share happens also to the Share CFD. If one share is given for every existing share then a CFD trader receives one more CFD contract for every CFD contract he holds. The impact remains the same.

(4) CFD trading offers exemption from taxes

(5) Share CFDs can help traders to easily bet on both the market’s directions

Dividend Policy

Shares pay annual dividends to their owners. At the beginning of the ex-dividend day, the amount of the dividend is deducted from the share’s price. Therefore if you are holding a share CFDs position during the ex-dividend date:

  • If you are Long: The dividend is received

  • If you are Short: You pay the dividend

Practically the effect is neutral, as the payment of the dividend offsets the movement of the underlying share’s price, no matter if the position is short or long.

Shares Trend Well

Shares can be very volatile. The valuation of a listed corporation may alter dramatically due to a great number of reasons. For example, mergers/acquisitions, new patents, and new licenses may double the price of a share. From a technical analysis point of view, shares trend very well. Share traders may easily follow strong trends by taking advantage of the leveraged nature of CFDs. Furthermore, traders can follow the mid-trend by opening positions on CFD Futures. Trading CFD on Futures does not involve overnight charges. Therefore, a CFD position becomes free of overnight charges until the underlying Futures contract expires. Usually, a CFD on Futures expires after 2-3 months. CFD traders can achieve huge profits via trading this instrument given that:

(i) They can identify a strong trend

(ii) They will not be stopped out

What Affects the Valuation of Share CFDs?

(1) The value of the Underlying Company

The most important factor for the value of a corporation is its ability to create cash inflows and earnings. Earnings are transformed into dividends, and high dividends make shares attractive to more investors. There are tens of different financial ratios to evaluate shares, including P/E, P/E/G, P/Bv, P/S, and many more.

(2) The General Market Conditions

The general market conditions can have a dramatic effect on the valuation of a share. During euphoria, there can be valuations of P/E=500 and P/S=30.

(3) When investing abroad

If you trade a share that is listed in a foreign stock exchange, then the price of this share is adjusted to a particular currency exchange rate.


(5) Equity Index CFDs

  • Trading Indices from all around the globe

  • Dow Jones Industrial (US30), S&P 500 (US500), Nasdaq (US100)

  • Trading European and Australian stock indices

  • Trading the Dollar Index (USDX)

Speculation and Hedging

By opening positions on an Index CFD, traders can speculate on the market’s movement or hedge against the general market risk.

(i) Speculation on the current trend

(ii) Hedging existing positions against the general market risk

Trading CFDs on Indices

Indices trading is supported by enormous liquidity and that is transformed into tight spreads or else limited trading cost. This tight trading cost is extremely important for news traders, day traders, and scalpers.


Indices trade normally during news releases, but that is not the case for all financial markets. All experienced Forex traders know that during news releases the exchange rates move firstly in the opposite direction, before following the impact of news. That opposite price movement triggers retail stop-loss orders. Indices on the other hand, usually trade according to the news, without the opposite price movement. Most of the time, you can place narrow stop-loss orders without a problem.

Swing Trading

Swing trading is one of the most profitable ways to trade equities. Swing traders open positions that may last for a few days to a few weeks. CFDs due to their leveraged nature can transform 1-10% returns into 50%-500% returns in terms of the contract’s value. Furthermore, if you trade CFDs on futures you can avoid overnight SWAP rates. That means that you can open a position on the Dow-30 or on S&P 500 that will last for weeks without having to pay a single cent on overnight rates. The only thing you should care about is not getting stopped. Swing traders that can identify strong trends and place their stop-loss wisely (below 2 major support/resistance levels) can achieve very nice profits.

Hedging against market risk

If you have bought or sold individual shares you are exposed to a particular level of market risk. Index CFDs constitute an easy way to hedge against this risk and avoid trading ‘naked’. Index CFDs imitate and represent the market itself, and therefore, allow traders to hedge against any abnormal market movement that is triggered by unexpected news and events (macroeconomic, political, strategic, etc.).

Information about Stock Indices you May Trade via CFDs

A stock index represents the average movement of top shares that are listed on a particular stock exchange. For example, the Dow-30 represents the 30 most influential companies in the US market. FTSE 100 represents the 100 largest companies listed in London’s LSE stock market etc. Here are some important global equity indices you may trade via CFDs:

(i) US Markets: Dow Jones Industrial, Nasdaq, S&P 500, Russell 2000

(ii) European Markets: German DAX, France CAC-40, Euro Stoxx 50, UK-100

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

How can these Indices be Calculated?

Two approaches for calculating world indices:

(i) Most indices are formulated using a capitalization-weighted average. That means the greater the capitalization (price x number of shares) the greater the impact of the share on a particular index.

(ii) On the contrary, the US Dow Jones and the Japanese Nikkei are price-weighted indices. That means that the greater the price of a share the greater the impact on a particular index. Higher-priced shares influence the Dow-30 and Nikkei more than lower-priced shares.

Testing any Strategy on the Dow-30 Industrial Average

Test any equity-trading strategy in the Dow-30, before testing it anywhere else. If an equity-trading strategy is not effective on the Dow-30, it will probably fail on any other index as well. This is a very useful clue for beginners.


Comparing CFD Brokers

Here is a basic comparison between CFD providers. The following brokers are regulated, provide segregated client bank accounts, and have been in the market for at least 10 years.








Foundation: 2007

  • FSA (Seychelles)




► IC Trading for European Traders


CFD Provider

· Forex

· Soft Commodities

· Precious Metals

· Energies

· Shares

· Indices

■ MetaTrader4

■ MetaTrader5

■ cTrader

■ WebTrader




Free VPS Server for deposits of more than $5,000

$200 Minimum Deposit Amount



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)



Foundation: 2009


  • IFSC, license IFSC/60/271/TS



· Forex

· Cryptocurrencies

· Soft Commodities

· Precious Metals

· Energies

· Shares

· Indices

· ETFs

■ MetaTrader4

■ MetaTrader5

■ cTrader

■ WebTrader




Free VPS Server

$10 Minimum Deposit Amount

  • Social Trading



Wire | Cards

Neteller | Skrill

AdvCash | PerfectMoney

Open Account:

RoboForex Website



Foundation: 1999





· Forex

· Soft Commodities

· Precious Metals

· Energies

· Shares

· 21 Indices

· Bonds / ETFs

■ Jforex Platform

■ WebTrader

■ JavaTrader




$1,000 Minimum Deposit Amount


10% (under a policy)


Bank Wire

Open Account: 

Dukascopy Bank


CFD Trading Tutorial


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