Europe FX Education
Contract for difference (CFD) trading is a form of trading based on speculation on price rises or falls in fast-moving global markets. CFD can be performed with shares, commodities, indices, currencies, and treasuries. Because of the derivative nature of CFD trading, many people are unsure whether to venture into it and whether it is just a sophisticated form of gambling. It’s no easy answer, but here are some of the facts to help you decide.
CFD Trading Versus Gambling
EuropeFX is a great trading platform for you to trade in a number of different markets including in CFDs. To assess CFD trading against gambling, one must take an objective look at the similarities and differences between them.
CFD trading as with any other form of trading can become like gambling when done wrong. Gambling is a game of chance, and all actions taken pose considerable risks. When someone ventures into trading without any understanding of the underlying financial and economic principles upon which global markets function and trading works, this can indeed be a form of gambling. This is why it is recommended that beginners start off with a demo account and with some trader education as offered by EuropeFX.
With CFD trading, you do not actually power the asset such as the shares in a particular company. Instead, you buy CFD units in the market you want based on which direction you believe the prices are going to go—whether up or down. This can make it slightly more risky than regular trading as you do not own any shares. Many people believe that the key similarity to gambling is in the amount of leverage that you get. You can get up to 500 times leverage on the amount you have, which means you can lose more than you put in. So before you start trading CFD’s on EuropeFX, make sure you know how much risk you can handle.Check with Europe FX Education.
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