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WHAT ARE CFDs AND WHY ARE THEY SO POPULAR?

Your Comprehensive Online Guide to Getting Started with CFDs

CFDs are increasing their influence on modern investing

 

Social media has been buzzing about an innovative online platform which is used by millions of people worldwide, called a “CFD” system. After a recent Daily Mail article revealed the story of a modest UK burger van owner, with no previous experience, who started using CFDs and is now followed by hundreds of investors around the world who are looking to recreate his success. But what is all the buzz really about and how did he make such a significant impact on the investment community? There is much more to it than you might think.

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CFDs are recently becoming more and more popular since they provide the possibility for ordinary people, even complete beginners, to profit from the financial markets. Historically, such access was the sole domain of wealthy individuals who could afford the hefty fees and minimum requirements of investing through large broker firms.

However, in the last few years, internet advances have changed that completely, widening consumer access to financial market investments and the variety of methods in which they can invest. This has been supported by the increasing access to free financial information on the internet through sites like Yahoo Finance.

So What Exactly Are CFDs?

Contracts for Difference (CFDs) are an easy access tool for anyone interested to increase their financial holdings by investing in the global markets. Designed in the 1990s, a CFD behaves like the asset underlying it; in that, someone can buy a CFD of a share of Amazon for example, and the CFD will mirror the price of the share exactly. Instead of having to go through a middle-man like with traditional brokers, pay heavy management fees and be required to invest high amounts, CFDs allow you to do so from your computer at home , with even as little as $100. This framework allows for a simplification of the market, smaller fees and basically opens the option to profit from the financial markets to anyone interested.

The main advantage in CFDs

But how can you make significant gains from the financial markets if you are investing only $100? Here is the interesting part. The biggest advantage in CFDs is the possibility to “leverage your investment.” CFD platforms can effectively give you an interest-free loan so you can invest larger amounts that could allow you to generate a significant profit. For example, if you bought $100 worth of Amazon shares one year ago, you would today have a gain of $77. But if you’d instead chosen a CFD with 10x leverage, your investment would still have been $100, but your gains today would be $770. So even if you don’t invest high amounts, with the help of leveraged CFDs you could still make significant profit.

A consistent rise is not a guarantee, but it is a strong indicator accepted by professional investors.

So What Is The Bottom Line?

Overall, CFDs have provided the opportunity to profit from the financial markets even for those who don’t have previous experience or have only a modest amount of starting capital. The combination of low fees and the ability to profit from the financial markets means CFDs are only going to increase their influence in modern investing. And all of this is possible using just your computer, an internet connection, and at the touch of a button.
If you’re interested to getting started with a CFD platform, here is our step-by-step guide on how to open an account and make your first CFD investment.

 

 

So, what do you need to do if you want to invest in CFDs?

 Step 1

Click here to register for a free account with one of our trust brokers, in order to get access to the global market

 Step 2

Make a deposit of £ $ € 250 or more, depending on the amount you wish to invest. When all boxes are filled in, click the green deposit button.

 Step 3

Once you’ve made your deposit, type in “CFDs” in the search bar on the top left of the page and select it from the dropdown list.

In the example below, we used Apple to go through the steps, but it works exactly the same for CFDs.

 Step 4

On the CFDs investment page, click the BUY button.

 Step 5

Type in the quantity of shares you want to invest. The cash amount is shown to the right (circled green).

A great thing about Markets.com is that they give leverage. But what is leverage? If you look at the example screenshot below, we invested only €207 in Apple stock, but, thanks to available leverage (circled blue), we were able to get €2070 worth of Apple Contracts. Where did the rest of the money come from? This was effectively an interest-free loan Markets.com gives us for investing through their platform. Of course, feel free to invest as much or as little as you like to match your financial goals.

If you wish, you can also use the “take profit” or “Stop Loss” to automatically stop your position once you reach a certain profit or loss amount.

Click the “Place Order” button, and you’re done.

Congratulations!

You’ve just invested in CFDs. If the price of CFDs goes in the direction you chose, you will be able to withdraw your money as cash, it’s that simple.

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