7 Secrets You Should Know Before You Even Think Of Cfd Trading

While the process of trading CFDs may seem shrouded in mystery it is actually quite simple. Below are seven things you should keep in mind before you start to trade CFDs.

- Opening an account - Depositing and withdrawing funds - The safety of your money - How real is free brokerage? - How is overnight financing defined? - Earn by short selling - How to bypass the uptick rule

What to do first

1. First step is to open an account with your chosen CFD broker. You may have fill out an application form and provide the basic information about your trading and your experience as well.

2. Each time you deposit money it goes straight into a segregated trust account which is separate from the company’s daily business operation. This is not a requirement in all countries, but it is in Australia.

Money Goes In and Out

3. To fund your account you can deposit funds via electronic transfer, cheque or credit card. When funding through electronic transfer your funds usually clear within 24-48 hours.

4. Hopefully soon you will be in the right position to withdraw the funds from the CFD account as an end result of your trading profits. Withdrawing funds is quite simple and the most common way to do this is to link a nominated bank account to your CFD trading account and submit a withdrawal form.

How true is free brokerage?

5. Trading index CFDs are commission free in general. CFD brokers allow anyone to trade index CFDs without commission because they have a spread on the index that you’re trading.

6. CFD brokers are willing to offer an index CFD free of commission since they charge the overnight financing rate which can be as high as the RBA rate plus or minus 4%. Another best advantage of CFD trading is that when you are short selling you actually get paid for the days you hold the position overnight.

Uptick Rule Is Not Required

7. Fortunately the uptick rule does not apply to CFD trading or Forex trading and you're able to open a short sell position irrespective of how the price of the stock you are tracking moves.

Be sure to understand these 7 things before you get on to CFD trading.

By: Jeff Cartridge

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