Trading experience: Bet on known underlyings

As already mentioned, CFDs are derivatives that are derived from a specific underlying asset. Most brokers are so-called market makers who provide the buy or sell price themselves. An order placed is therefore not forwarded to an exchange. For CFD trading, it is of utmost importance that the CFD broker shows the correct underlyings available on the market. Due to the leverage effect, deviations have a major impact on a possible profit or loss.

At the beginning, you should therefore only invest in underlyings that you know well. First and foremost, the stock index and American or European blue chips are recommended. When trading commodities, gold or oil are particularly suitable.

The influence of leverage

In the case of currencies, it is the major currency pairs that are to be preferred. In connection with trading on contracts for difference, it is very important that prices come from a reliable source. Due to the leverage effect already mentioned, even a few pips of difference are noticeable. Traders who want to specialise in shares must keep the nature of CFDs in mt4 download in mind. Since no direct share ownership is subscribed, no dividends can be realised.

There is, of course, a reason why traders initially tend to enter via known underlyings. Here the market volume is relatively high - for example with the major pairs in the forex segment. This means that individual larger transactions have less influence on the market. Exotics, which have a low trading volume, can be pushed up and down much more strongly by this. Strong volatility may bring high profits at first. However, the price fluctuations are also much more difficult to assess.

Do not hold overnight positions at the beginning

This tip can be seen from several points of view. In principle, it is also possible to keep contracts for difference open beyond the close of trading. Traders can thus pursue a "longer-term" strategy. However, an overnight position is also a cost risk.

Background: Brokers charge a fee for this. The amount varies, so it is not easy to make a general statement. Investors who have several such positions in their portfolio have to dig deep into their pockets. From a beginner's point of view, there is another reason against overnight positions.

It regularly happens that new framework conditions for underlyings arise after the close of trading. In the case of shares, this can be certain market data - such as regulatory decisions. Such fundamental data cause prices to shoot up or lose a lot of ground. If you have bet on a bearish development, you will have a massive problem with your overnight position. If trading starts at an extremely devalued price, dramatic losses threaten. Over time, experience will show which markets are less sensitive to such scenarios. Until then, however, it is better to close positions at the close of trading. A trading strategy that can be easily automated with the order supplement CFD.