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Trade Stock and Index CFDs with Deriv.com Ebook guide Vince Stanzione
CFD stands for contract for difference, a derivative product for speculating on the future direction of a market’s price. You won’t be buying or selling the underlying asset, which in this case is an individual stock. All that changes hands is the money equal to the price difference when the contract is closed. Basically, the price of the asset changes from the beginning to the end of your trade, and this difference will be your profit or loss.
Why trade CFDs on Deriv
- Trade less than one share.
The price of one Amazon share at the moment of writing this book is US$3,000, which many can’t afford. Fortunately, Deriv gives you the option to trade CFDs on a fraction of a share.
- Profit from down moves.
Most brokers will only let you sell a share you own, whereas, with CFDs, you can sell first (also known as short selling) to profit from down moves. I will explain more under the section entitled Trend lower.
- Profit from down moves.
Most brokers will only let you sell a share you own, whereas, with CFDs, you can sell first (also known as short selling) to profit from down moves. I will explain more under the section entitled Trend lower.
- Enjoy transparent, two-way pricing and instant execution.
During normal trading hours, Deriv will display a Buy/Sell price of the stocks it offers. There is no need to wait for a broker to get back to you.
- Use leverage.
Deriv allows you to use leverage in trading CFDs on stocks and stock indices. It means you only need to pay a percentage of the stock’s value when opening a stock CFD trade on Deriv. The difference between the amount you need to pay and the actual asset price is known as “margin”. The margin requirement will be shown to you after you open a trade. It can be as low as 5%, which means you could buy $100,000 of stocks with as low as $5,000 of margin.
Of course, the margin can give you bigger gains if the stock behaves as you’d predicted, but it can also work the opposite way and magnify your losses.
Deriv offers ways to protect yourself using stop loss orders. It also has negative balance protection. If a trade goes completely against you, you will not be asked for additional funds, and your account cannot end up having a negative. As we go further through this ebook, I will also explain risk management.
