How to trade CFDs on forex markets

Find out everything you need to know about trading CFDs on forex markets, including what forex CFDs are, how to trade them, and more.

What are forex CFDs?

Forex CFDs are financial instruments that allow traders to speculate on currency pairs using leverage. Given the high volatility of the forex market, many traders opt for CFDs because they enable trading on both upward and downward price movements.

When trading CFDs, leverage is applied, meaning you only need to provide a small deposit, known as margin, to control a larger position. However, your profits or losses are calculated based on the full value of the position, which can greatly exceed your initial margin. Therefore, it’s essential to implement effective risk management strategies when trading CFDs.

What’s the difference between forex and CFDs?

The key distinction between forex and CFD trading lies in ownership. CFDs are derivatives, meaning traders don’t own the underlying asset but rather trade based on its value. In contrast, forex involves trading actual currencies as the asset itself.

Both forex and CFDs are typically traded using leverage, allowing traders to control larger positions with a smaller initial investment. While leverage can amplify potential gains, it also increases the risk of larger losses. Many traders use CFDs, alongside other leveraged derivatives, to trade in the forex market.

With CFDs, you’re speculating on whether the price of an asset will rise or fall within a certain timeframe. If you take a long position and the asset's price increases, you profit by the amount of the price rise. Conversely, if the price drops, you incur a loss. If you go short and the price falls, you gain, but if the price goes up, you lose.

How to trade forex CFDs?

1. Open a Live Trading Account: Markets.com is a prominent online trading platform that offers access to a variety of financial instruments including forex, indices, commodities, stocks, and cryptocurrencies. Click here to get your account.

2. Log in on Markets.com: Access your trading account by logging in to the broker's platform, such as Markets.com. This is where you'll manage your trades and monitor market conditions.

3. Fund Your Account: Deposit funds into your trading account. Make sure to understand the minimum deposit requirements and available funding methods.

4. Find Your First Trade: Navigate to the forex CFDs section of the platform, analyze currency pairs, and select the trade you want to execute. Use technical and fundamental analysis to inform your trading decisions.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.Trading cryptocurrency CFDs and spreadbets is restricted for all UK retail clients