What are CFDs
CFD stands for Contract For Difference. This type of financial instrument allows you to benefit from the fluctuations in the price of stocks, commodities, indices and more, without really purchasing them; i.e. you can profit from the difference between the opening price and the closing price of a certain position opened on a certain CFD instrument. It is important to us to emphasize that you don’t own the asset you trade. AvaTrade was one of the first online brokers to offer CFD trading, giving individual traders access to a large range of markets which were not accessible to them before.
Why Trade with AvaTrade
- Trade with confidence – AvaTrade is an internationally regulated broker.
- Large variety of CFD instruments – Trade commodities, indices, ETFs, stocks and bonds.
- Powerful Platforms – Manage your trades manual or use our automated trading.
- Leveraged Trading – Up to 200:1 leverage on various CFDs.
- Master your trading skills – Expand your horizons by entering our educational materials & daily updates.
- Best in class customer service – 24/5 multi-lingual live support with a dedicated account manager.
What is CFD Trading?
CFD trading is quite similar to forex trading. When trading on the platform, you select the instrument you wish to trade and enter your order. Just like in other trades, if you think the price of a certain instrument, e.g. crude oil, will increase, you’ll want to buy the crude oil CFD. The same goes the other way – if you predict the value will go down you sell the CFD.
Naturally, like any type of trade or investment, wrong predictions can lead to loss of money, and one should be aware of the risks involved in CFD trading. There is plenty more to learn about the trading of CFDs, and you can learn more by browsing through the education section, in which you can watch video tutorials, read articles, get news updates, check out our glossary and more. Some more information on CFDs and their advantages can be found here.
How to trade CFDs with AvaTrade
AvaTrade presents to its clients various trading platforms, for manual as well as automated trading. Providing different features and tools, our clients can find a platform which is the most convenient for each of them to use. We also offer the option of opening a demo-account, so you can practise trading on those platforms before you start trading with your own money.
Leverage offered by brokers allows you to open positions larger than what your actual capital allows. At AvaTrade we offer up to 200:1 leverage on various CFD instruments, which means you need only 0.5% or your position size in order to open the trade.
For instance, if you wish to trade crude oil, buying 20 barrels at the price of $44 USD per barrel, then your position size will be $880 USD. However, due to the 100:1 leverage offered by AvaTrade on crude oil, you will need only 1% of your position size in order to hold this position, i.e. $8.8 USD.
Leveraged trading can magnify trader’s profits. However, at the same time one should take into account that losses can be magnified as well.
How Much Will it Cost to Trade CFDs
AvaTrade offers attractive trading fees, charging only the spread of the opened positions. Spread is the difference between the sell and buy prices of a certain instrument. When calculating a cost for a position, you need to multiply the spread by the size of the position. This is the spread charged for the position. For example, if the spread for crude oil is $0.03 USD, the cost for opening a 10 barrel-position is $0.03 X 10 barrels = $0.3 USD.
Most of the CFD instruments are traded on floating spreads, which means that the spreads are affected by the liquidity of the market. The more liquidity the narrower the spread will get (Only 3 instruments have fixed spreads at all times: gold, silver and crude oil).
You can review the offered leverage and spreads for all CFD instruments on our Trading Conditions & Charges page on the website.
CFD Contract Rollover
Each CFD is based on a contract defining its rates, charges, etc. Each of these contracts has a maturity date, which is the date that the contract expires and automatically replaced by a new contract. In order not to disturb traders during market hours, the contract rollover takes place over the weekend.
For more information, you are welcome to visit our CFD Rollover page.
Start Trading CFDs with AvaTrade
If you think you know which way the market will go and want to start trading – it’s time to join AvaTrade and enjoy the best CFD trading experience! Open an account now to enjoy yours, or try our risk-free demo account.