Investing in the financial markets require an advanced trading platform that can give you access to products traded in the equities market: commodities, currencies, forex, stocks and CFD’s (Note: eToro is among the top choice for trading online due to its good reputation and number of available assets. If you’re interested to know more about eToro, we recommend that you visit www.wikitoro.org, a comprehensive and detailed wiki site for traders who are interested to trade with this broker). These trading platforms provide the necessary tools for trading, with some requiring further research to identify the specifics related to the market.
What are CFDs?
A CFD (Contract for Difference) is a contract between a buyer and a seller. A seller pays the buyer who purchased an asset price difference between a particular date and the purchase date. However, if the market price difference is lower, the payment goes to the seller.
To illustrate an example, you purchased a stock worth $256 at 15h. After three hours, the price increased to $276. Your profit from this transaction is $20. However, you only betted on the change in the stock price; you are not actually buying the asset, it is not your own possession and it does not belong to you.
CFD’s, therefore, allow you to make real profits by trading on the price changes in these assets (commodity, currency, stock or index). These financial products are made available to traders who want to make quick profits. Furthermore, while you can gain immense rewards, the initial capital involved can be small, and you can close the investment by choosing the contract expiry that you prefer.
One advantage in trading on CFD’s is that your profits have the potential to be greater than your initial capital. For an initial investment of € 2,000 you can use this as a leverage of up to a 2:1 ratio and make a profit twice that amount. Talk about maximum benefits! Take note, though, that risks may also be doubled.
What Does the Future Hold for Traders?
The future holds immense possibilities for all traders. There is an immense opportunity for traders to take part in the price increase or decrease of stock indices, without having to engage in securities. Fluctuations in market prices of raw materials (precious metals, energy) prove to be lucrative sources of profits as well. In addition to this, traders are provided a platform for managing interest rate differentials. And there is a broad choice of markets to trade on, not only in the products of agriculture but also in what is considered as black gold- oil.
Adapting leverage of 1:10 (or 10%) on an investment amount of € 1,000, you can earn up to € 10,000 in a single trade!
Why Trade in Forex (Foreign Exchange)?
The Forex market is a good venue to trade various currencies. Different national currencies are paired (e.g. USD/EUR or the US Dollar and Euro trading pair). This refers to the number of US Dollars needed to buy € 1. It should be noted that there is a continuous relative movement with each currency. Fluctuations in currency trading are constant, owing to the volatility of the Forex market. It creates more opportunities to trade in different currencies, giving you the chance to use this volatility as a leverage for increasing your profits 10x or 100x your initial investment. As with any financial product, heed the market reports to assess potential risks.