CFDs - How to Trade Them
What are CFDS?

What is a Contract Difference or CFD & Why Trade CFDs?

1. A leveraged way to trade ASX Shares, US Stocks, Singapore Stocks. Japanese and European Stocks
   
2. You  put down a deposit and then are margined on the Contract Difference between your buy or sell level and the current market price
   
3. Effectively if you  buy a CFD you are borrowing to buy it and therefore you pay a Interest Margin if you have bought. If you have sold you are lending and receive interest.
   
4. There are two major types of CFD providers to trade with. Which one you choose can greatly affect your bottom line. The 2 are Price Makers (or Bucket Shops as Jesse Livermore used to call them) and Direct Market Access CFD Providers
   
5. Price Maker CFD Providers trade against the customer and make money when you lose.
   
   How to Spot a Price Maker CFD Provider:
   
   * They usually advertise aggressively and
   * ask for only a small deposit and give higher leverage
   
   Why?
   
   * Because they want you to lose!
   The more people they get in who are scared undercapitalised the happier they are
   
   * Because they can move the price to trigger your stops regardless of where the real market is they make more money off you!
   
6. Direct Market Access CFD Provider send your trades directly to the market and are not trading against you. They are true CFD brokers and are there to help you. Yes, they will charge brokerage - but the brokerage is far far less than what the price market
   

Because, contracts for difference are effectively undated Futures Contracts that allow you to tailor your risk size and with a few thousand dollars you can control tens of thousands of dollars of stocks, CFDs have allowed smaller traders to enter into the markets.

Futures contracts are for one set face value and so are not quite as flexible as CFDS.

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