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What is a CFD?

A CFD (Contract for Difference) is a financial derivative that enables traders to profit from price movements in various financial markets without owning the underlying assets. Whether the market is rising or falling, CFDs allow traders to participate by either going long (buying) if they expect prices to rise or going short (selling) if they anticipate a drop. The value of a CFD contract is based on the difference between the price at which the position is opened and the price at which it is closed. This flexibility in trading both directions makes CFDs an attractive option for those looking to easily navigate volatile markets.

Contracts for difference (CFDs) offer a flexible and accessible way to trade diverse markets, including stocks, indices, commodities, currencies and more – all without owning the underlying assets on our award-winning platform.

What is CFD Trading?

CFD trading is essentially the practice of trading on the price fluctuations of a range of financial instruments. These include shares, indices, commodities, and currencies. Using CFDs, traders can invest in both rising and falling markets. For instance, if a trader believes the price of gold will increase, they can go long and benefit from any subsequent rise in value. Conversely, if they think the market will decline, they can go short, profiting as prices drop. The core principle is straightforward: profit or loss is determined by the difference between the CFD contract's entry and exit price.

What’s the Difference Between CFDs and Share Trading?

The primary distinctions between CFD trading and traditional share trading include:

Ownership

With CFDs, you do not actually own the underlying asset, whereas in share trading, you own the stock.

Leverage

CFD trading allows for greater leverage, meaning you can control larger positions with a smaller amount of capital, while share trading typically requires you to pay the total asset price upfront.

Short Selling

CFD trading makes short selling more accessible and straightforward. In contrast, short selling in traditional share trading can be more complicated and may not always be available.

Cost-Efficient

CFD trading typically has lower transaction costs. This, combined with the benefits of leverage, can make CFDs a cost-efficient way to trade various markets compared to share trading.

Benefits of CFD Trading

CFDs offer leverage, meaning you only need to deposit a small percentage of the trade’s total value. This amplifies your potential returns and market exposure. But it is important to remember that losses are also magnified, so it is essential to apply appropriate money-management techniques

CFDs offer traders the flexibility to profit in both bullish and bearish markets. Whether prices are climbing or falling, you can position yourself to capitalize by going long or short. This ability to profit in either market direction sets CFDs apart from traditional forms of investing, which often only benefit from rising markets.

CFD trading provides access to a diverse range of global markets. From stocks, indices to commodities and currencies, traders can diversify their portfolios and seize opportunities across multiple asset classes. These markets are available from a single trading platform, offering convenience and efficiency in managing trades.

Compared to traditional forms of trading, CFD trading often comes with lower transaction costs. The cost structure makes CFDs an appealing option, particularly for those looking to make frequent trades while keeping costs manageable.

What Markets Can You Trade with CFDs?

Shares

Trade CFDs on individual stocks from major global exchanges.

Indices

Gain exposure to stock market indices like the S&P 500, NASDAQ, and others.

Commodities

Trade popular commodities such as gold, silver, crude oil, and more.

Currencies

Explore popular currency pairs like EUR/USD, GBP/USD, etc.

ETF

Diversify your portfolio with Exchange-Traded Funds that track sectors, indices, or commodities.

Bonds

Access global bond markets and trade CFDs on government and corporate bonds with ease.

How to Trade CFDs

Open an Account

Open a Demo Account or Live Account on the Nextgen Trader Platform

Choose Your Product

Finalise the type of Product you wish to trade

Analyze Market Trends

Understand the Charts and the Risks and Rewards

Open Your First Position

Execute the trade

Why Trade with Nextgen Global

35 Years of excellence

Choose a trusted broker that server over 50,000 clients only in UAE.

Regulated by SCA

Nextgen Global is fully regulated and licensed by the Securities and Commodities Authority in UAE.

Trade your Style

Trade on your preferred MT5, CQG, TWS, and the most intuitive Nextgen Trader.

100+ Industry awards

Trade with a broker that has been repeatedly recognized for the quality of its services.

24/5 Support

Take advantage of our dedicated customer support for helping our clients 24 x 5 days.

Enhanced insurance upto US$ 2M per client

Trade with confidence, and receive additional protection for your funds, with comprehensive insurance coverage of up to US$2 million per client, in the unlikely event that we become insolvent.

Frequently Asked Questions (FAQs)

Is CFD Trading for You?

CFD trading might be suitable if you understand financial markets well and are comfortable with the risks associated with leveraged trading. It’s essential to have a well-thought-out trading plan and the discipline to manage risk effectively. However, be mindful that CFD trading carries significant risk, and losses can sometimes exceed your initial investment. Always assess your financial situation and risk tolerance before diving into CFDs.

CFDs let traders speculate on the price movements of different assets, such as company shares, ETFs, stock indices, commodities, and treasury bonds.

CFDs use leverage, meaning you only need to put down a small portion of the total trade value to open a position, giving you exposure to a much larger amount of money.

Risk management is crucial in CFD trading. Use tools like stop-loss orders, take-profit orders, and limit orders to manage risk. It’s also important to trade within your financial means and have a clear trading plan.

Nextgen Global allows you to trade over 10,000 instruments. Decide whether you want to go long (place a buy trade) or short (place a sell trade) based on whether you expect prices to rise or fall; choose your trade size; place your trade; and monitor your position.

In CFD trading, dividends are called price adjustments. If you hold a long position when a company announces dividends, you receive a payment. However, if you hold a short position, the same amount is deducted from your account.