CFD (contract for difference) trading lets traders speculate on the price movement of a whole range of financial markets including currencies, shares and bonds, whether the price is rising or even falling.
It is a popular way to trade in the financial markets for reasons such as the availability of hedging tools, the flexibility of being able to trade both rising and falling markets; and also, the fact stamp duty is not required to be paid on gains, makes it tax efficient.
One of the main things that deters people from entering into CFD trading is the idea of using their real money when they are not fully competent in trading or fully aware of what they are doing.
There is lots of material that can be studied before starting to trade, but the best thing to do before starting to trade, or even alongside trading in the early days is to use demo accounts and practice trading that way.
Using a demo account is the ideal way to learn about trading without risking any real funds. You are given virtual funds to trade with and you can research strategies and try out different ones to see how your trades would have performed in the real world. Doing this can help you build confidence before using your own funds.
Demo accounts allow you to get to know the markets you might find yourself trading in, explore them and consider which ones you might want to trade in.
You can try out different opening and closing positions; which then gives you an understanding of how deal tickets work. Another important thing you can learn by using a demo account is the importance of having a stop loss within trading and you can practice putting one into effect.
Getting to grips with charts is also possible through the use of demo accounts, something you will find very useful when trading later on. You will be able to learn how to read and analyse charts and try out different technical indicators within them.
There are many trading platforms that offer quite good demo accounts, City Index being one of the better ones who offer unlimited trading platforms, £10,000 of virtual cash, real time pricing as well as all features and tools. So if anyone wants to learn about what CFD trading is all about, City Index is a great place to start.
Spending some time on a demo account analysing past market data and also reviewing all your previous demo trades will really help you to learn from what you have done and improve your strategy before taking the plunge and risking your own money.
Most demo accounts will also provide you with access to news feeds and up to date market data, which can also be very useful when planning a strategy and sometimes provides a chance to identify opportunities to be exploited.
Before starting any form of trading, in particular CFD trading, it is key that you first attempting the simulation of trading with a demo account. It is also the ideal way of experimenting with new strategies, even when you are already an experienced trader.
The bottom line is s fully functional demo account will allow you to work out how everything works, build your confidence and develop a strategy, before using real funds. The use of a demo account goes a long way in improving the odds on you being a success in the CFD trading world.