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What Is CFD Trading?

The world of today is one which is constantly being upgraded. Upgraded by new technology, upgraded by new thoughts and upgrade by new concepts. In this ever changing dynamics of the global market, CFD trading is a term that might be fairly new to some individuals. But although it may sound alien to you at first, but believe us, it is not so hard.

In this short article we will discuss what is CFD Trading and what it means for you. Let’s begin!

What is CFD Trading?

The acronym CFD stands for Contract for Defence Trading, which in the most simplest of terms can be explained as an understanding between a broker and a trader which allows them to reap profits from the price movement of assets without taking into consideration their underlying prices. Although the concept might sound a little complex at first, but it is a relatively simple security which was first introduced by European Traders and Stock Brokers.

The concept didn’t get a global publicity until the last few years when its advantages were reaped by both clients and brokers on a global scale. Today it is used across all major stock markets in the world and is a key factor in determining if a trade will be profitable or not.

How does a CFD trading actually work?

This type of trading process is achieved due to an understanding between the trader, broker and the client and was first introduced so that all parties involved in a transaction could profit from moving prices without taking into consideration underlying prices. In the past decade or so, trading using CFD methodologies have severely increased due to its wide popularity and acceptance all across the globe.

An example of it works

For example let’s take that a particular stock in the market is trading for a price of $25.26 and the trader buys 100 such shares. In a normal trading account, the client has to shell out $2,526 plus commission and fees. While in a CFD trading account, only 5% payment is required and thus the client will shell out only $126.30.

Now the stock increases in price and the final price before market closes is at $25.76. For those who traded through a normal trading account, will make a 3.95% profit or return on their investment; but those who traded through a CFD trader will make a 38% return on thier investment. Win win for everyone.

Conclusion

Since the inception of CFD trading in global markets, it has provided both clients and traders with a significant amount of advantages. Some of the most common of them being, having a higher leverage, having access to a global market from one dashboard, no need to shortening shares or borrow shares because of higher price, execution from professional fees because of low initial investment, and no need for day trading.

All in all, contract for difference trading has made a difference in the global market like no other and it is here to stay.

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5 Habits for Successful Trading

From our very childhood, we have heard our parents say, that discipline and good habits are what makes a man or a woman successful. Be it as it may, good discipline and habit also applies to the global forex market. The world’s top traders are not those who make spontaneous decisions and make huge profits over night. They are those who have developed habits over time and with hard work, that lets them deliver successful small gains overtime, which is the long run add up to become sizable profits.

But what are these good habits. We know you wonder!

Thus in this article we will cover 5 habits for successful trading and how they can impact your overall profits.

Wake up early

The start to a good day begins when you wake up early and freshen your mind. With a fresh mind in place, you can concentrate better and thus make good decisions throughout the day, which in the long term will lead to profits you can cherish.

Analyse and Research

All successful traders across the globe follow this strategy. Before the market opens for the day, they do a through analysis and research on all the stocks they have on their watchlist. This strategy helps them in two ways; first, they can informed decisions during the day which will help them make profits. Two, they don’t need to make spur of the moment, complex decisions that might otherwise lead to a loss.

A trading plan

Any seasoned trader will tell you that they already have a trading plan in place which they rigorously follow. These plans are often kept as secrets and every trader makes adjustments to it now and then when they feel the need. But no matter when they are trading or whom they are trading for, they will always follow these trading plan to the T, in order to deliver successful profits over time and in the long run.

Don’t trade everyday

One of the key and most important aspects that new traders often fail to realise is that patience is one of the most important factors for success. With that being said, most traders know that they don’t have to trade everyday. A proper analysis and research helps them invest in stocks and assets which they know will perform well over time and thus curbing the need to trade day in and day out.

Self reflection

We all make mistakes. We are humans. But the one aspect that differentiates a successful trader from those who are not is self reflection. Successful traders always take a moment out of their daily schedules and make time for self reflection. This helps them in understanding and analysing both the good decisions they made and also take a look at the bad decisions which could have been avoided, which in turns boosts their learning curve and helps them become better traders the next day.

Conclusion

Once a great man said, imitating the habits and rituals of successful people is the best path to reach the destinations they have and the same is true for the forex market as well.

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The Difference between Online Forex and Exchange Trading

We have all come across terms like the NYSE and the BSE once in our lifetimes. But while the global forex market is a different ball game altogether, not everyone is aware of the key differences between the stock market and the forex market; thus in this article we will discuss about the top differences between both the markets, that you need to be aware of.

The Forex vs. Stocks

When making the initial choice of which market to choose, traders often get confused between what is more convenient for them or in other terms, which market is easier for them to make profits in. But one point that traders don’t realize is the fact that the Forex market and the Stock are two entirely different things and the forex market has some unique advantages, which the stock market does not share.

When choosing between markets, knowing the similarities and differences will help you keep yourself and also make more informed decisions. Thus mentioned below are the top differences between the stock and the Forex markets.

Volume

The first and most important difference between the forex and the stock market is sheer volume. On an average, the Forex market generates a revenue of more than 5 trillion USD a day, while all the stock markets combined across the globe, only account for 200 billion USD per day. The sheer increase in volume is due to the time zones, which keeps the Forex Market open, 24 hours a day.

Having such a volume is advantageous to traders in a variety of ways. First, is the liquidity, which being high means that traders can get trades closer to the price they want and also they can enter and exit the market more conveniently.

Liquidity

As mentioned in the previous point, a higher volume means more liquidity. This increased liquidity means that the spreads are extremely tight and traders need to pay less commission fee. Also they can get to their trades faster and thus exit and enter market conveniently at all times.

24 hours

The Forex Market is one single integrated entity, which operates across hundreds of continents, each having their own time zones. This means that the market is open 24 hours a day, all 5 business days a week.

This allows trades, to trade throughout the day and make substantial profits at all times,

No Commission

Most forex brokers around the world, don’t charge a commission at all or charges are very minimal. What they do is charge on the spreads, which are very tight, due to the sheer volume, all of which adds up to more profit for the traders.

Conclusion

The global forex market is a tough game and not everyone succeeds. But with knowledge comes power and thus keep checking Theliquidity for all the latest information, news, tips and tricks.

Theliquidity; your one stop for everything Forex.