CFD Trading for Beginners: A Step-by-Step Guide

Forex, commodities, and stock trading have dominated the online trading landscape. However, more traders are now shifting focus to CFD trading. Instead of owning shares, stocks, or foreign currencies, you can trade on price movements.

In addition, you don’t need a massive amount of capital to get into CFD trading. This, plus the flexibility of CFD markets, makes it a great option for new traders. If you are a beginner in CFD trading, this CFD trading guide is for you.

CFD Trading 101

CFD in full stands for contract for difference. With CFDs, traders don’t need to hold shares or purchase commodities to trade. Traders speculate on the price difference of an asset from when the markets open to when they close.

The primary way of making profits as a CFD trader is by correctly predicting whether prices will grow or fall. You can buy, or go “long,” if you think the price will rise. However, if you expect the prices to drop, you can go “short,” also known as selling.

Step-by-Step Advice: How to Start Trading CFDs

Find a Reliable CFD Broker

Your journey as a beginner CFD trader starts by finding the best broker. Ensure the broker is regulated by reputable financial bodies, either locally or globally. Next, check which markets you can access with the broker. Make certain there are no hidden fees before opening an account with the broker.

Open and Deposit Funds into Your Account

You will get two accounts after signing up: a demo account and a live account. Use the demo account to learn how to start trading CFDs. It is risk-free and offers the perfect environment for testing CFD trading strategies for beginners.

If you are new to CFDs, don’t worry; you can find useful information to help you get started on this helpful site.

Choose a Market to Trade

The next step is selecting a market you are interested in. This is why we insist on choosing a broker offering access to different markets. Start by doing in-depth research and analysis to identify potential opportunities.

This information will be useful when choosing whether to go long or short. Many beginners often start with stock CFDs because they are easy to understand and speculate on.

CFD Trading Strategies for Beginners

CFD trading for beginners can get overwhelming, especially if you have no prior experience in trading. Building a trading strategy will help guide you as you work your way towards placing your first live trade.

Trend-Following Strategy

It is the easiest strategy to master. All you need to do is identify market movements and hope they will hold that trajectory for some time.

Swing Trading

This strategy works best if you want to open and hold positions for a long time. The goal is to capture gains from short- to medium-term price swings. If you are a beginner CFD trader who cannot afford to spend hours staring at charts, swing trading is a good strategy.

News-Based Trading

Like the name suggests, the idea here is opening positions based on what’s happening in the world of economics and geopolitics. However, this strategy isn’t ideal for learning how to trade in CFD because price movements can be highly volatile.