FAQ
1. What does CFD abbreviation mean?
Contract for Difference.
2. What is CFD or Contract for Difference
A CFD is a contract between a broker and a trader. CFD trader is placing bets on the movement of stock price by selecting a certain number of shares. As soon as a trader place a bet he has entered a contract, when the trader closes his contract the difference between opening price and closing price will decide if he trader made a profit or a loss.
3. What is long trading or “going long”.
Placing a contract on shares you believe are going to gain in value.
4. What is short trading?
Placing a contract on shares you believe are going down in value.
5. What is stop loss?
A stop loss is a standing order to automatically close your position when shares price falls below a specifed value. By using this tool you can limit losses in your trading.
6. What is a margin?
The margin is the amount of money given to you by your CFD dealer on top of your initial deposit. Small margins are usually in the range of 1% to 5%, which means if you place $1,000 into your trading account on a 1% margin you can have $100,000 to trade. Placing $1,000 with a 5% margin means you can trade with $20,000. Small margins are riskier as they magnify your losses as well as your profits.
7. What is a margin call?
A demand from your CFD broker to place more money into your trading account to be able to continue trading. It means you have run out of money in your trading account.