A contract for difference (CFD) is essentially an agreement between two parties, in this case it’s between a buyer and seller or trader and broker. Specifically, a CFD means a seller, the broker, will have to pay the buyer, the trader, the difference of an asset’s current price from its contract’s value. In the event that that difference is negative, then the trader pays the difference rather than the broker. Like with standard Forex trading, the underlying asset is never actually owned.
CFD trading is a precarious form of investing that requires traders to follow a backtested strategy if they wish to profit. This is why it’s highly advised for any new trader to leverage the power of CFD trading signals.
The Benefits of CFD Signals
Unlike other types of trading signals, CFD signals are unique in that they can come from all markets, such as in stocks, indices, commodities and currencies. A CFD signal’s delivery method will differ with each provider, but every signal should contain the asset, strike price, direction, stop loss, and take profit level. A signal for a CFD trade will look something like this:
Buy Market price: US Oil $42.00 Stop $41.55 Profit $43.85
And because of the highly unique nature of CFD trading, most reliable signal services will continue to update the trade’s progress as it relates to current market conditions. In CFD trading, it’s not uncommon for stop loss and take profit levels to change or for traders to hedge against losing positions. CFD trades are typically held longer compared to other types of signals, usually for several days, sometimes even weeks.
Signals for CFD’s can be delivered through a number of ways, including:
- Live trading rooms
- Email message
- SMS text alerts
- Phone apps like WhatsApp
- Social trading platforms