Trading via CFDs
As a client of XLNTrade you can trade financial products via CFDs.
A contract for difference (CFD) is a common form of derivative trading. CFD trading enables you to speculate on the rising or falling prices of fast-moving global financial markets such as shares, indices, commodities, currencies.
With CFD trading, you don’t buy or sell the underlying asset but units for an instrument depending on whether you think prices will go up or down. We offer CFDs on a wide range of global markets and our CFD instruments includes shares, currency pairs, commodities and indices.
How does it work?
Let’s say that the price of gold was $1,500 an ounce, and you thought it might increase. In that case, you could open a ‘buy’ trade – this is known as a ‘long’ trade, and it means that you will open the trade at one price, expecting that the price will rise, and then you will close the trade (or ‘sell’) at a higher price, making a profit on the difference between the sell and buy price.
So, if you opened the trade when gold was priced at $1,500, and then closed the trade when gold hit $1,525, you would make a profit of $25.
If you thought the price of gold was going to fall, on the other hand, you could open a ‘sell’ trade in your trading platform. This is known as a ‘short’ trade, and it means you open a trade expecting the price of an asset to fall, and then close the trade (or ‘buy’ the asset back) and make a profit on the difference.
So, if you opened a short CFD trade when gold was priced at $1,500, and then closed the trade at $1,450, you would make a profit of $50.
CFDs follow the price of the market, so how successful (or unsuccessful) your trades are, depends on the market’s performance).
One of the biggest benefits of CFD trading is the use of leverage, which means you can access a larger portion of the market than what you could buy traditionally with the money you have available on your account (known as the margin).
Depending on the instrument you’re trading, you may be able to open trades of a value that’s up to 30 times the value of your account balance.
So, if you have $1,000 on your account and available leverage of 1:30, you can access $30 for every $1 on your account or make trades that are valued up to $30,000.
If you wanted to buy an ounce of gold valued at $1,500, you will need to spend $1,500. With CFD trading, on the other hand, you can open a trade of that value with a fraction of that amount on your account.