FOREX & CFD's
In recent years, Forex trading has attracted interest in many countries around the world.
This is because of the ease of access that the Internet has brought us.
Anyone with Internet connectivity from their mobile device or laptop can take part of this $4 trillion industry every day.
Forex trading also provides leverage, which means that only a fraction of the value of the desired trading position needs to be deposited to be able to transact. For example, if you have a broker account that has a leverage of 1:400, that means you only have to provide $1 for every $400 position. This means if you sell a position to the value of $4 000 000 you only need to have $10 000 for that position.
Leverage also implies that if the market fluctuates in a way that would favor you as a Forex trader, you would earn higher profits, but the drawback would be if the price moves against you, which would also result in higher losses. This is why you need to understand and know the fundamentals from the base as a beginner Forex trader.
CFDs is an abbreviation for the "Contract for Difference"
CFDs are an agreement between two parties to exchange the difference between the opening and closing prices of a position on a contract, multiplied by the size of the underlying asset specified in the contract.
Trading CFDs is the same as in the foreign exchange market, it is conducted on a margin basis. This is the same concept as explained about Leverage. You don't need to have large amounts of money to fill positions.
You can trade CFDs by selling them, or you can buy CFDs. These transactions use only a fraction of the actual value of the assets involved in the transactions. When trading CFDs, an investor does not need to deal with a physical commodity, worry about its transportation and storage, because there is no real supply of commodities.
Trading operations involving CFDs are much easier to carry out than, for example, gold or stocks. There is no actual transfer of any assets in CFD transactions. In this case, the income received by the investor is due to the difference in the value of this asset in different periods of time.
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