Types of CFDs

CFD trading has become more and more popular in recent years, as it allows investors to speculate on the changing price of the assets without actually owning them, which means investors can find more opportunities in both bull and bear markets. Whether the prices are rising or falling, it’s always possible for investors to make profits from the markets.

A contract for difference (CFD) is an arrangement made in financial derivatives trading, which pays the difference in the settlement price between the open and closing trades. Different brokers may offer different types of CFDs, what markets.com offers basically are: Forex CFDs, Shares CFDs, Commodities CFDs, Crypto CFDs, Indices CDFs, ETFs CFDs, Bonds CFDs

Forex CFDs

Forex CFDs are contracts used to trade currency pairs via leverage. The forex market is known to be highly volatile, so traders often choose to trade this asset class using CFDs – as it enables them to speculate on both rising and falling prices.

Traders can trade forex CFDs using leverage, meaning traders can gain a potentially higher market exposure by putting down just a fraction of the full value of your trade. Higher exposure leads to bigger ups and bigger downs. With forex trading, you can speculate when one currency is rising as well as falling as compared to other currencies.

Shares CFDs

Shares CFDs are based on individual shares, e.g., Amazon, Alphabet, Meta, Tesla, and Apple. Trading stocks as Contracts for Difference (CFDs) enables traders to speculate on the price movements of underlying equities without owning the actual shares. This means traders can profit from both rising and falling prices of stocks without the need to buy or sell the stocks themselves.

Markets.com offers a lot of stocks as CFD assets, such as TESLA, AMZN, GOOGLE, DEUTSCHEBANK, Occidental, Porsche AG, Hermes and so on. All you need to do is to open an account, and you can trade these Shares CFDs on one platform.

Commodities CFDs

Commodities are generally divided into three categories: Agricultural, Energy, Metals. Commodity CFDs track the price changes in the underlying commodity markets without requiring the trader to own them in a physical form. For example, if you are a crude oil CFD trader, you can trade the price changes of a barrel of crude oil without having to own one.

Commodity CFDs tend to be very volatile and require a lot of capital to trade profitably because of the wild price swings. Commodity CFDs are favored due to commodities serving as indicators of global economic health and risk sentiment. During periods of optimistic global economic forecasts, commodity prices typically rise due to heightened trader risk appetite. Conversely, during times of global economic uncertainty, traders adopt a "risk-off" sentiment, leading to declines in commodity prices. Markets.com offers you popular forex pairs as CFDs, such as EUR/USD, USD/JPY, USD/CAD and so on.

Crypto CFDs

When trading cryptocurrencies as CFDs, you do not own the underlying asset. Instead, you are speculating on the price movement of the cryptocurrency, and you do not need a digital wallet. If you think that the price of the cryptocurrency will increase, you buy - or go long. If the price moves in your favor, you make a profit. However, if the price declines, you make a loss.

Trading CFDs on crypto involves trading on margin and may involve the use of leverage, which allows traders to open larger positions with less capital. Leverage magnifies both profits and losses, traders are only required to contribute a small portion of the money involved in each trade.

Indices CFDs

Traders prefer contracts based on index performance because of the high leverage possible, liquidity, and volatility these types of investments offer. Popular indices are the Dow Jones, NASDAQ, London Stock Exchange, Australian Stock Exchange, and Japan’s Nikkei. Those who trade indices believe that a specific market will rise as a whole. The advantages of index CFDs include the high trading volume, low margin, high leverage, low trading costs, and the access to international markets that would otherwise be difficult or costly. A great thing about stock index trading is that indices are correlated, they tend to show a similar response to a global event, so it’s easier for traders to predict.
Popular indices traded as CFDs include the following：
DAX (Ger30) - Germany
Nasdaq 100 (US100) - US
S&P 500 (also called SPX500) - US
Dow Jones (US30) – US
Nikkei 225 (JPN225) – Japan
Australian Stock Exchange (ASX200)
Shanghai Composite (SSE180)
France 40 (CAC40) – France
Euro Stocks 50 Index (STOXX50) - Brussels
Hang Seng (HK50) - Hong Kong
Spain 35 Index (IBEX35) – Spain

ETFs CFDs

An exchange traded fund (ETF) is a basket of assets that is compiled into a single fund, which can then be treated like a company stock, and be bought or sold on an exchange. An ETF basket can be composed to track either a single market, or a group of markets.

With ETFs CFDs, traders are able to pool assets from different markets into one place to trade at once, without having to open multiple brokerage accounts in various locations, trying to look for the best assets to trade at any time. Some ETFs are created in a unique manner, allowing the traders to get exposure to uniquely harnessed assets that would otherwise not have been possible. ETF CFDs are leveraged assets, the leverage will amplify potential returns and risks.

Bonds CFDs

Bonds offer traders the opportunity to speculate on interest rates and risk on/off sentiment, diversify a portfolio or reduce risk and build defensive positions during periods of economic weakness or uncertainty.

Bonds are part of the fixed income asset class, Bond CFDs provided by markets.com are based on highly rated government issued debt securities. A bond CFD is a form of financial derivative trading. When you trade a bond, you are taking a position on the price of the underlying instrument and not purchasing the instrument itself, you can speculate on the price of the Bond by going long or short.

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.