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CFD is short for Contract for Difference. It is a more generic bracket as compared to all other kinds of trading. Talking particularly about trading, it comprises trading a real asset among other traders. Traders and brokers use trading options to buy and sell assets. CFD includes all varieties of trading with an additional feature. This feature makes it more fun and riskier as compared to other forms of trading.
CFD Brokers talk about the risks involved in CFD trading. The higher the risks mean higher returns when it comes to trading. It is not always true but applicable to most cases of trading.
CFD Dynamics and Difference with Other Trading Commodities
Contract for Difference (CFD) deals with contracts instead of an actual asset. The difference between CFDs and other forms of trading is that all types of trading require an investment. The investment turns into an asset, and traders use this asset to make money.
In CFDs, you can trade the assets of other investors. CFDs involve the trading of contracts. Traders receive a share of profit or pay a share of loss according to the deal.
Online trading uses commodities like forex, indices, currencies, stocks, and crypto. CFDs use contracts for all of the above-mentioned commodities. CFD Brokers allow investors to buy stocks, crypto, currencies, etc. CFD Traders trade the assets of other investors and make money. CFD trading works best for traders with profound experience in the field. CFD is the best option for people who lack money-wise and are unable to buy assets.
Best CFD Brokers for Experienced and Beginner Traders
eToro – eToro is considered one of the best CFD brokers in the trading industry. Used by over twenty million users worldwide, eToro provides an extensive set of features when it comes to CFD trading. It provides contracts in almost all the trading commodities. The reason it is considered one of the best CFD brokers is that it offers the lowest percentage of losing money. CFD trading is riskier than other forms of trading. eToro is the only CFD broker that offers 67% of retail losses.
AvaTrade – AvaTrade comes right under eToro in terms of CFD trading. The percentage loss of retailers is just five percent more than that of eToro. Just like eToro, AvaTrade is regulated, protected, and maintained by financial bodies to prevent fraudulent cases. With over 200,000 users, AvaTrade offers low minimum deposit and demo accounts to gain experience.
XTB – XTB is protected, maintained, and regulated by a handful of financial bodies. It offers no minimum deposit and negative balance protection. Losses in retail CFD account for only 77%.
The reason CFD trading is measured in terms of percentage losses is that it is riskier than all other trading commodities. It also offers high returns to CFD traders. Retailers often lose their money in CFD trading because the majority do not have any previous knowledge or experience. That is why CFD brokers emphasize experience before trading contracts.