CFD Trading for Beginners

Contracts for difference, also known as CFDs, allow investors to speculate on the price of financial markets without taking ownership of the underlying asset. CFDs are also usually traded with leverage, meaning clients can increase their position size (and potential profits), in return for a small deposit. Both characteristics make CFD trading popular with beginners.

This guide explains how to get started trading CFDs. We cover the merits and drawbacks of contracts for difference, beginner-friendly trading strategies, plus the top brokers in 2024. Use our CFD trading for beginners tutorial to get started.

Best CFD Brokers

  1. rating empty
    rating full

    IG offers a huge selection of 17,000+ CFDs, providing more trading opportunities than most CFD brokers. Traders can go long or short on popular markets like stocks, currencies, commodities and cryptos, while custom price alerts and the IG Academy continue to enhance the trading experience.

  2. XTB

    rating empty
    rating full

    XTB offers a huge selection of more than 2,100 CFDs spanning forex, indices, commodities, stocks, ETFs, and cryptos (location-dependant). Leverage up to 1:30 is available in the EU and UK, while global clients and pro traders can access up to 1:500. XTB stands out for its CFD trading resources and tutorials to assist traders in developing short-term trading strategies.

  3. rating empty
    rating full

    CMC lets you trade CFDs on 12,000+ assets across currencies, indices, commodities, shares, ETFs and treasuries. Spreads are relatively tight, there are no hidden fees and the industry-leading MetaTrader 4 platform is also supported for leveraged trading. Year after year, CMC shines as one of the best CFD brokers in the market.

  4. rating empty
    rating full

    FXCC offers a narrow range of CFDs beyond forex with a limited selection of metals, energies, indices and cryptos. However, it stands out with its high leverage up to 1:500, which will serve experienced traders looking to maximize their buying power while speculating on rising and falling prices.

  5. rating empty
    rating full

    You gain access to over 2,250 CFDs, available for trading 24/5 across popular markets such as forex, commodities, indices, stocks, and bonds. Utilizing deep liquidity and advanced bridge technology, IC Markets ensures optimal conditions for scalpers, hedgers, and algo traders alike.

  6. rating empty
    rating full

    Pepperstone maintains its position as one of the fastest and most dependable CFD brokers during our latest round of testing. With execution speeds averaging around 30ms and an outstanding fill rate of 99.90%, the broker ensures a seamless trading experience without requotes or dealing desk interference. It also provides ample trading opportunities across over 1,300 assets.

  7. rating empty
    rating full

    Eightcap offers a wide range of trading options with 800+ CFDs across stocks, indices, bonds, commodities, and cryptocurrencies (depending on location), with leverage up to 1:30/1:500. It excels in its tools, notably the AI-enabled economic calendar covering 25+ countries with impact filters (high, medium, low). However, its commodities offering, particularly in softs like cotton and wheat, as well as the limited precious metal and energy assets, is its weakest area.

  8. rating empty
    rating full

    RoboForex offers a growing suite of over 12,000 CFDs, encompassing forex, stocks, indices, commodities, futures and ETFs. With an initial deposit of $10 and micro lot trading through to very high leverage up to 1:2000, RoboForex caters to a broad range of derivative traders. On the downside, analysis reveals execution speeds of 1-3 seconds, noticeably slower than IC Markets at 0.35 seconds, and suboptimal for fast-paced strategies like scalping.

  9. rating empty
    rating full

    You can trade CFDs on over 3,000 assets and access rich market data through the integrated TradingView charts. There are also comprehensive free learning tools available for beginners via the eToro Academy, including dedicated CFD trading courses and guides.

  10. rating empty
    rating full

    With the ability to take both long and short positions on 5,500+ CFDs across forex, stocks, indices, commodities, and cryptocurrencies, FOREX.com excels. Its exclusive Web Trader platform offers an excellent trading experience, equipped with over 80 technical indicators and average execution speeds of just 20 milliseconds, ensuring an optimal environment for serious traders.

  11. rating empty
    rating full

    You can trade CFDs across a range of diverse markets with flexible account types and leverage up to 1:1000. With access to both MT4 and MT5, traders can execute multiple short-term CFD trading strategies using the dozens of pre-integrated technical indicators and graphical objects.

  12. rating empty
    rating full

    Trade leveraged CFDs on over 1000 assets with low-cost spreads. You can also take advantage of the broker's integrated signals to help you determine when to enter and exit positions.

  13. rating empty
    rating full

    You can speculate on popular financial assets covering forex, commodities, indices, metals and bonds. You can get started with $0 minimum deposit, making the broker a good pick for beginners. There’s also over 130 technical indicators available collectively in the MT4 and OANDA Trade platforms.

  14. rating empty
    rating full

    BlackBull Markets CFDs are offered on forex, stocks, indices, commodities and cryptos with tight spreads and high leverage. The ECN accounts offer fast execution and low slippage, and the broker provides traders with plenty of extra tools and features plus 24/7 customer support.

  15. rating empty
    rating full

    Traders can speculate on 1000+ financial markets with high leverage up to 1:500. You can bet on rising and falling prices in currencies, commodities, indices, shares, and more without owning the underlying asset. With the comprehensive choice of CFD trading platforms, users can also switch between desktop, web and mobile for a seamless trading experience.

  16. rating empty
    rating full

    FxPro offers thousands of CFDs on forex, commodities, indices, shares and futures. The broker's analysis and charting capabilities continue to stand as some of the best in the industry, with Trading Central integration, advanced order types and access to custom indicators.

  17. rating empty
    rating full

    Trade 5,000+ CFDs from a single account with no hidden fees and free live market data. The suite of markets is impressive vs alternatives, including access to shares, indices, commodities and bonds.

  18. rating empty
    rating full

    You can go long or short on a range of CFDs covering forex, commodities, shares, indices and cryptos. High leverage up to 1:500 is available for experienced traders in some locations, whilst beginners will appreciate access to micro-lots. There are no restrictions on short-term trading strategies using CFDs.

  19. rating empty
    rating full

    You can trade 275+ CFD instruments covering equities, currencies, commodities, indices and cryptocurrencies. The broker offers flexible trading software and account options, plus access to the unique dealCancellation risk management tool, which is ideal for beginners.

  20. rating empty
    rating full

    Access highly leveraged CFDs across forex, commodities, indices, stocks and bonds with 24/5 customer support. Build a diverse portfolio with hundreds of CFD assets.

  21. rating empty
    rating full

    CFDs are available on forex, stocks, indices, metals, oil and cryptos, with support on MT4 and MT5. Execution speeds are also decent, averaging 0.5 seconds, though there is also a VPS service facilitating 24/7 connectivity for algo strategies.

  22. rating empty
    rating full

    CFDs are available on forex, indices, commodities and cryptos, although the range of 100+ instruments is limited compared to alternatives such as Quotex with 400+. Leverage is available up to 1:500 but the $250 minimum deposit is noticeably higher than competitors.

  23. rating empty
    rating full

    Markets.com offers a strong variety of CFD products, not only covering popular asset classes but also more interesting markets such as IPOs and Bonds. The low fees and educational resources will appeal to beginners, whilst seasoned CFD traders will appreciate the feature-rich charting platforms.

  24. rating empty
    rating full

    You can trade a range of CFD instruments across forex, shares, indices and commodities. There’s an excellent selection of platforms for traders, including TradingView and MT4, plus additional tools for experienced algo traders including API solutions.

  25. rating empty
    rating full

    Trade CFDs on Spreadex's diverse list of instruments with leverage up to 1:30 and highly competitive spreads. While this broker's USP is spread betting, the excellent trading terms and range of markets makes it an equally good choice for CFD trading.

  26. Axi

    rating empty
    rating full

    Axi offers 220+ products covering forex, shares, commodities, indices and cryptos. Spreads on EUR/USD come in at around 0.2 pips in the Pro account and 1.1 pips in the Standard account. These are competitive and aligned with equivalent accounts at leading low-cost brokers like Pepperstone.

  27. rating empty
    rating full

    The broker offers a small range of 100+ CFD instruments spanning key markets, with high leverage up to 1:500. Pricing is reasonable, with round turn commissions coming in at $6 alongside tight spreads. Multiple short-term strategies are also permitted, including hedging and scalping.

  28. rating empty
    rating full

    VT Markets offers over 1000+ CFDs spanning currencies, stocks, indices, ETFs and commodities. The MetaTrader charting platforms provide dozens of technical tools alongside integrated market analysis resources and zero restrictions on short-term trading strategies.

  29. rating empty
    rating full

    My tests uncovered around 100 CFD products covering forex, indices, commodities and cryptos. Leverage is available up to 1:400 and it’s good to see that scalping, hedging and EA strategies are permitted.

  30. rating empty
    rating full

    PrimeXBT offers CFDs across four asset classes with very high leverage up to 1:1000. Beginners can also take advantage of the broker’s useful technical analysis guides and CFD education, plus 24/7 in-platform support via live chat.

  31. rating empty
    rating full

    Traders can access CFDs across forex, indices, commodities and stocks. There are no restrictions on short-term strategies, which is good news for scalpers and algo traders. There’s also an excellent range of free tools on offer, including a custom price ticker.

  32. rating empty
    rating full

    FXTrading offers CFDs on a wide range of assets, including forex, stocks, commodities, indices and cryptocurrencies. Commodities include a selection of softs as well as metals and energies, and the eight indices offered include the US30, US500 and UK100. Flexible leverage is available with excellent risk management tools.

  33. rating empty
    rating full

    M4Markets offers CFD trading across forex, stocks, indices, commodities and cryptocurrencies. Traders can access powerful charting platforms with multiple order types and built-in indicators. There’s also a good selection of data-driven analysis tools supplied by reputable provider, Acuity.

  34. rating empty
    rating full

    ThinkMarkets continues to offer an excellent range of around 3500 CFD instruments covering forex, indices, stocks and commodities. Leverage is available up to 1:30 in the EU and UK, while global clients can access up to 1:500.

  35. rating empty
    rating full

    Over 8,000 CFDs are offered on a vast array of instruments, encompassing stocks, indices, forex, and commodities. Moreover, the TWS platform lends itself to seasoned traders, offering a comprehensive selection of over 100 order types and algorithms, alongside premium market data sourced from reputable sources such as Reuters and Dow Jones.

  36. rating empty
    rating full

    Access over 2,000 CFDs across diverse markets including indices, commodities and bonds. There is also premium daily analysis and strategy resources for savvy traders.

  37. rating empty
    rating full

    Trade 400+ CFDs on forex, stocks, commodities, indices and cryptocurrencies with the choice of commission-free or raw-spread accounts with transparent fees. Speculate on rising and falling prices with no hidden charges.

  38. rating empty
    rating full

    IronFX’s asset list of 300+ instruments covers forex, stocks, commodities and index CFDs. Maximum leverage from 1:30 to 1:1000 is available depending on account location. Traders can access superb technical analysis features, including 30 pre-integrated indicators and 9 charting time frames.

  39. rating empty
    rating full

    Ingot Brokers offers CFD trading on 1000+ instruments including stocks, commodities and cryptocurrencies. The MT4 and MT5 platforms offer comprehensive features for active CFD traders, including multiple order types and pre-integrated technical tools.

  40. rating empty
    rating full

    Trade CFDs on forex, stocks, indices, commodities and cryptos with high leverage up to 1:500 on the no-commission ClassiQ account. The raw spread account options have low commissions from $4 round-turn and offer lower maximum of leverage of 1:200 or 1:400, which is still competitive.

  41. rating empty
    rating full

    You can trade hundreds of CFDs on major asset classes including currencies, shares and futures. Spreads are not overly competitive starting at 0.9 pips, although the $50 minimum deposit and zero commissions will allow active traders to keep their costs down.

  42. rating empty
    rating full

    Trade CFDs on forex, indices, metals, oil and cryptocurrencies with high leverage up to 1:500 and competitive spreads, with the choice between zero commission or raw spreads.

  43. rating empty
    rating full

    Dukascopy offers highly leveraged CFDs with rates up to 1:200. A wide selection of asset classes are available, including currencies, equities, commodities, ETFs and cryptos. Spreads are also tight starting from 0.1 pips and traders get 24/7 support.

  44. rating empty
    rating full

    Trade 200+ CFDs with leverage up to 1:1000 on a powerful proprietary platform. Asset classes include stocks, forex and crypto with ECN execution. You can bet on rising and falling prices with leveraged CFDs.

  45. rating empty
    rating full

    Videforex CFDs are available on forex, indices, cryptocurrencies and commodities with up to 1:500 leverage and tight spreads from near zero. CFDs incur a commission fee of 1%–2.5% and up to 5% for leveraged trades.

  46. rating empty
    rating full

    Rock Global offers low-price CFDs on forex, shares, indices and commodities. The broker charges zero-commission trading on commodities and indices, and zero-spread, commission-only trading on shares. Leverage varies by instrument with 1:200 available on indices and 1:10 on blue-chip stocks.

  47. rating empty
    rating full

    You can trade a competitive range of CFDs encompassing crypto, indices, energies and metals, with very high leverage up to 1:1000. ECN pricing is available, with spreads from 0.0 pips and low commissions from $2.50. A Cent account is also available for those on a smaller budget.

  48. rating empty
    rating full

    CFDs are available on a breadth of underlying assets, including stocks, indices, commodities, forex and cryptos. High leverage up to 1:500 is available alongside a 0.01 minimum lot size and award-winning software. For the tightest spreads from 0 pips, opt for the Premium account.

  49. rating empty
    rating full

    Trade CFDs on forex, indices, stocks, commodities and cryptocurrencies with leverage up to 1:3000. Swap-free trading is available, and all account types trade with competitive spreads and are commission-free except the Go Pro account, which charges a $7 round-turn commission.

  50. rating empty
    rating full

    CFDs are available on popular asset classes with a competitive $1 minimum deposit. The MT5 integration will allow serious short-term traders to utilize the vast library of technical tools, bots and indicators, but the lack of any CFD trading education puts the broker behind many alternatives.

  51. rating empty
    rating full

    Focus Option offers CFD trading through an intuitive mobile app, with 300+ tradeable instruments spanning forex, cryptocurrencies, commodities, shares and indices. Leverage ranges from 1:20 to 1:50 and spreads are variable, starting from 1 pip, with no commission.

  52. rating empty
    rating full

    Trade CFDs on forex, stocks, metals, energies, indices, cryptos and dollar futures. Sage FX offers tight spreads and high leverage on all instruments from 1:100 to 1:500.

  53. rating empty
    rating full

    OspreyFX offers leveraged CFDs on forex, commodities, stocks, cryptos and indices. Deep liquidity is available from 50+ providers with a competitive ECN account that will suit active trading strategies, including scalping.

  54. rating empty
    rating full

    Errante customers can trade stocks, indices, commodities and cryptocurrencies with leveraged CFDs. The level of leverage available depends on regulatory oversight, with 1:30 the maximum allowed in the EU though this varies by asset.

  55. rating empty
    rating full

    Trade flexible CFDs on forex, commodities, indices and cryptos with tight spreads, fast execution, micro-lot trading and leverage up to 1:500. There are also no restrictions on trading strategies.

  56. rating empty
    rating full

    Trade a decent range of markets via CFDs, with commissions of $6 per lot. There is also a reasonable $10 minimum deposit and 24/7 customer support for new traders.

  57. rating empty
    rating full

    Trade CFDs on 75+ instruments, including forex, energies, metals, and indices with variable leverage up to 1:500 on major pairs, 1:200 on minors and exotics and 1:100 on commodities and energies.

  58. rating empty
    rating full

    Trade CFDs on a broad range of asset classes including forex, energies, precious metals, company shares, indices and cryptos. The excellent trade execution and opportunity to trade with direct market access pricing sets this broker apart from rivals.

  59. rating empty
    rating full

    Anzo Capital clients can use MetaTrader 4 and MetaTrader 5 to trade CFDs on stocks, equity indices, crude oil and precious metals with competitive price levels.

  60. rating empty
    rating full

    Switch Markets offers 180+ CFD instruments with 1:500 leverage and fast order execution speeds of <76 ms. I find commissions are also fairly competitive, coming in at $7 per round turn for Pro account holders.

  61. rating empty
    rating full

    PU Prime offers CFD trading on hundreds of shares, as well as indices, commodities, bonds and cryptocurrencies. The leverage available varies by asset, and spreads also vary greatly between instruments and account types with the tightest near zero and the widest in the hundreds of pips. Stock, index, commodity and bond CFDs are traded on the leading MT4 platform.

  62. rating empty
    rating full

    AdroFx offers a most selection of around 100 CFDs on stocks, cryptos, indices and commodities. Its appeal lies in the high leverage up to 1:500 which you can't find in heavily regulated jurisdictions and the commission-free pricing model which will serve beginners. You can speculate on both rising and falling prices from the same product with CFDs.

  63. rating empty
    rating full

    Trade all markets via CFDs, with retail leverage up to 1:30. With the RStocks Trader account, clients can access over 12,000 CFDs with algorithmic analysis tools and intuitive charts.

  64. rating empty
    rating full

    Access thousands of CFDs with competitive pricing and leverage up to 1:500. A range of asset classes are available, including currencies, shares, indices, metals and commodities. CFDs can be traded on the market-leading MetaTrader platforms.

  65. rating empty
    rating full

    Global Prime offers CFD trading opportunities on 150+ global markets including forex, indices, commodities, cryptocurrencies and bonds. Spreads are tight with a raw ECN account available starting from zero.

  66. rating empty
    rating full

    ActivTrades specializes in CFD trading, offering over 1000 instruments spanning currencies, shares, indices, commodities, and more. The broker has picked up industry awards for its CFD trading environment, delivering fast and reliable order execution with transparent margin requirements for traders.

  67. rating empty
    rating full

    Swissquote offers spot, forward and synthetic contracts on a breadth of markets, including stocks, indices, bonds and commodities. The pricing model is transparent with no hidden fees. Clients can diversify portfolios and hedge risk with low margin requirements.

  68. rating empty
    rating full

    SimpleFX stands out with highly leveraged trading options up to 1:1000 covering popular asset classes, including stocks, indices, currencies and commodities. Additionally, the social community serves as an excellent resource for gathering CFD strategy tips and short-term trading ideas.

  69. rating empty
    rating full

    EZ Invest offers leveraged CFDs on popular asset classes, including forex, stocks, indices and commodities. Execution speeds are decent but a large deposit is needed for the best pricing conditions.

  70. rating empty
    rating full

    Fortrade's list of leveraged CFDs covers a wide range of asset classes including forex, stocks, bonds, indices, commodities and cryptocurrencies. Traders can access leverage up to 1:30 and will trade with zero commission, fast execution and low latency on MetaTrader 4 or the bespoke platform.

  71. rating empty
    rating full

    FP Markets offers CFD trading on a first-rate selection of financial markets, spanning stocks, major global indices, commodities, metals, cryptocurrencies, and bonds. With tight spreads, fast execution speeds, leverage up to 1:500 and top-tier liquidity, short-term traders get an efficient and seamless trading experience.

  72. rating empty
    rating full

    HYCM traders can access CFDs on a range of stocks, indices, commodities and ETFs with floating spreads and maximum leverage varying by instrument. Clients also have a choice between two industry-leading platforms.

  73. rating empty
    rating full

    FXOpen offers CFDs on multiple assets including forex, stocks, commodities, indices, cryptocurrencies and ETFs. Leverage and spreads vary by instrument, with spreads starting from zero and fast order execution.

  74. rating empty
    rating full

    Trade CFDs on forex, stocks, commodities and indices with tight spreads and leverage limited to the FCA-sanctioned maximum of 1:30. Infinox traders benefit from lightning-fast execution speeds and a choice between STP and ECN pricing, making this a flexible option for beginner and serious traders.

  75. rating empty
    rating full

    Traders have the opportunity to engage in CFD trading across a broad spectrum of assets, including currency pairs, stocks, commodities, bullion (gold and silver), indices, and cryptocurrencies. Experienced traders can access high leverage up to 1:1000 in certain jurisdictions. However, a notable downside is the restriction of scalping strategies which may deter experienced traders.

  76. rating empty
    rating full

    Trade 8,900+ CFDs spanning forex, stocks, indices, commodities, options and bonds with powerful tools and signals.

  77. rating empty
    rating full

    SuperForex offers CFDs on a good range of assets, though it only really shines when it comes to forex, thanks to its very diverse list. On the other hand, the significant leverage available on most assets increases profit potential, though traders will need to watch out for spreads, which compare poorly to some competitors.

  78. rating empty
    rating full

    Trade CFDs on 100+ instruments from popular asset classes. Leverage up to 1:200 is available on precious metals, while stocks, indices and energies can access 1:20 max leverage and 1:10 for commodities. On the negative side, the depth of assets is limited vs other CFD brokers.

  79. rating empty
    rating full

    Trade CFDs on forex, stocks, indices, commodities, ETFs, bonds and cryptocurrencies with variable leverage up to 1:30. The broker provides great value to traders with six free trades per day on US, UK and European stocks, tight spreads on forex and low commissions on ETFs.

  80. rating empty
    rating full

    With CFDs on 20+ Polish and 30+ US stocks, as well as energies and seven global stock indices covering US, UK, European, Australian and Japanese markets, Just2Trade offers a superb selection of global assets.

  81. rating empty
    rating full

    You can take positions on a range of popular trading markets including forex, stocks, energies and metals. Leverage is high at 1:500 and live spreads can be viewed in the web-accessible platform and app.

  82. rating empty
    rating full

    World Forex's leveraged CFDs are available on a modest suite of 100+ instruments, including stocks, commodities and forex. Very high leverage up to 1:1000 is available for account balances up to $1000, with lower levels available to accounts with higher balances.

  83. rating empty
    rating full

    Trade CFDs on forex, stocks, metals, energies, cryptos and indices with high leverage up to 1:1000 on major currency pairs, 1:200 on metals, 1:100 on indices, 1:33 on stocks and energies, and 1:5 on cryptocurrencies. The range of 200+ instruments is not the biggest on the market, but the variety of asset classes provides flexible trading options for most traders.

  84. rating empty
    rating full

    Access a modest range of CFD instruments across key markets, including indices and commodities. Clients can trade directly from charts with high leverage up to 1:500 and customisable time intervals.

  85. rating empty
    rating full

    Trade commission-free CFDs on 3000+ instruments from forex, stock and commodities markets with volumes starting from 0.1 lots, a low minimum deposit of $10 and tight floating spreads. The selection of CFDs beats most competitors.

  86. rating empty
    rating full

    Trade CFDs on forex, commodities, indices and crypto assets. With spreads from 0 pips and generous incentives and bonus offers setting Vault Markets apart from competitors, this Namibian broker will appeal to aspiring traders.

  87. rating empty
    rating full

    Trade CFDs on forex, stocks, indices, energies and metals with fast execution and variable leverage. Spreads are tight and commission-free trading is available on some assets.

  88. rating empty
    rating full

    FXTM’s CFD offering spans 600+ forex, stocks, commodities and indices, plus crypto (location dependent), with spreads lowered in recent years. Advanced traders can also get industry-topping leverage up to 1:3000 through Exinity Ltd, amplifying results but necessitating strict risk management.

  89. rating empty
    rating full

    Trade CFDs on an array of assets with ultra-low spreads

  90. rating empty
    rating full

    Engage in leveraged CFD trading across a wide array of instruments, encompassing forex, stocks, commodities, and indices. Yet while the selection of asset classes is satisfactory, the charting software and floating spreads for short-term traders fall behind that of competitors.

  91. rating empty
    rating full

    Trade leveraged CFDs in a range of financial markets.

CFD Trading Basics For Beginners

CFDs are placed using the trader’s understanding of the market, and the trader is hoping that the price of the underlying asset will rise or fall so that the position can be sold for a profit. Investors make money from the difference between the buy price and the sell price.

Because CFDs are leveraged products, there are also financing costs that must be paid on the borrowed funds that the broker provides. The formula to work out your returns when CFD trading is:

Closing sell / buy price – initial buy / sell price – (interest x number of days) – transaction costs = profit/loss

Importantly, CFDs are different from shares because there is no yield, so you can only make money from the transaction itself. This is because CFDs are a derivative – the trader does not actually own the underlying asset, for example a UK stock or gold. Instead, traders simply speculate on the price.

CFD trading for dummies pdf

Credit: Skilling

Trading On Margin

Margin trading refers to investing a percentage of the total cost of an asset, and having the rest lent to you by a broker. This allows traders to take on bigger positions when they don’t necessarily have big capital to invest. The percentage paid by the investor is determined by the broker, regulatory requirements, and the asset traded, but typically it’s between 5% and 20% of the total position size. If the market moves in the way you have predicted, you can keep the return, and pay the same amount of money back to the broker (minus any fees).

Importantly, most FCA-regulated brokers cap leverage to 1:30 for retail traders. As outlined above, margin trading opportunities also vary depending on the asset traded, with most brokers offering lower leverage rates on volatile markets like cryptos.

Let’s look at an example of a leveraged CFD trade:

If you are looking to buy a share in a company that costs $200, and your broker offers CFDs with a 20% margin, then you are able to buy one share for $40 while your broker lends you $160. If your position is closed when the share price is $250, then you return the same $160 to your broker, get your $40 investment back, and also get the additional $50 from your trade. Subtract any fees, and that is what you are left with.

CFD trading strategies for beginners pdf

Credit: CMC Markets

The downside of margin trading is that the borrowed money always needs to be returned to the broker, even if the market moves against you. As a result, leveraged CFD trading can lead to large losses if a careful approach to risk management isn’t taken. Fortunately, many of the best CFD brokers offer negative balance protection, meaning you cannot lose more than your account balance.

How To Start CFD Trading

The first decision is which broker to sign up with. A useful tip is to find a brokerage that offers a free demo account. This will let you practice trading CFDs with virtual funds and gives you the opportunity to find a strategy that works, without risking your own money. You can then upgrade to a real-money account when you feel confident.

Here are a few other things to keep in mind when choosing a CFD broker:

What Are The Fees?

Brokers don’t tend to charge sign-up fees for CFD trading accounts. This is because platforms often make their money from spreads, commissions and margin losses. All of these costs should be compared. It’s also worth checking for deposit and withdrawal fees, plus hidden charges like account inactivity penalties.

Is The Platform Beginner-Friendly?

Some platforms are not suitable for CFD trading beginners. One terminal that is, however, is MetaTrader 4. MT4 is offered by many of the top brokers and provides a user-friendly interface alongside a decent breadth of analysis tools. Users benefit from 3 execution modes, 2 market orders, 4 pending orders, 2 stop orders and a trailing stop. Multiple charting views, including basic candlestick charts, are also provided.

MT4 is available as a software download, browser terminal, plus via a mobile app. And because it’s so popular, there is a wealth of guides and tutorials online to help beginners get started.

Are They Reliable?

Unfortunately, not all CFD brokers can be trusted. This is why it is important that British traders sign up with a brokerage regulated by the Financial Conduct Authority (FCA). This will provide new traders with several benefits, from negative balance protection and segregated client accounts to a ban on misleading promotions and a cap on trading leverage.

CFD Trading Strategies For Beginners

When looking at trading CFDs for beginners, there are two basic approaches for novices to get familiar with:

Long Buy

A long buy position is taken when you believe the value of an asset will rise. Let’s say you think the value of oil will increase following supply and demand challenges caused by the Russia-Ukraine war. A long CFD position could see you generate a return if the price increases beyond its current value.

Note, when we refer to buying, we are referring to opening the position, which does not actually mean you are purchasing the underlying asset (barrels of oil). What you are purchasing is a contract that allows you to exchange the difference in price between when you open the contract and when you close it.

Short Sell

The short sell might appear to be the more complicated strategy for CFD trading beginners, but the best way to look at it is as a reverse long buy. When you short sell, you borrow the asset in order to sell it, before buying it back at a lower price further down the line. This is done when you believe that the value of the underlying asset is going to decrease.

So, if you believe that the value of Bitcoin will decline, then opening a short position with a CFD could lead to a profit. If the price of BTC does indeed drop, then you will make money equivalent to the difference in unit price at open compared to the current price, multiplied by the size of the position, minus any broker fees.

Strategies for CFD trading for beginners

Credit: IG

Learning

Having a basic strategy is a great place to start as a beginner to CFDs. But unless you continue to consume relevant material and commit to learning, you may see limited returns. We recommend setting aside time every week to get better acquainted with CFDs through the following:

  • Books – Books are one of the best ways you can immerse yourself in CFD trading. There are lots of great CFD trading books out there that come in the form of eBooks, audiobooks and physical copies, and many are specifically aimed at beginner traders. Content can cover everything from leveraged trading to risk management.
  • Courses – Courses are a great alternative to reading website content about CFDs or watching YouTube videos. Many courses are enough to help you progress from the beginner stage of CFD trading towards more advanced strategies and setups. Find a course from a highly rated provider that aligns with your budget. Note, some leading CFD brokers also offer free trading academies and tutorials when you open an account.
  • Online Community – Beginners can also turn to active investing communities available on social media channels and trading forums. Another great place to start is copy trading platforms. These applications allow traders to engage with experienced investors while mirroring their positions and strategies.

CFD Trading Tips For Beginners

It can be daunting to start trading with CFDs as a total beginner, however, with a supportive broker and the right mindset, it is possible to make money. We have also compiled a list of tips for CFD trading beginners.

Setting Up

One of the most important things to do before opening any positions is to research the market and confirm your predictions with technical and fundamental analysis. Also make sure you utilise stop-loss and take-profit orders to protect potential profits and limit any losses.

Discipline

When you start out, it’s easy to listen to a gut feeling or give in to emotions like fear or greed. However, this can derail an effective strategy and dampen the trading experience. Try and stay disciplined and follow your original approach. You can then review your progress and amend your trading system after it has run its course.

Broker

Finding a CFD broker might seem more like a formality than an important decision, but it can have a significant impact on your trading experience. Brokerages offer access to different markets with various fee structures, leveraged trading opportunities, supporting tools and more.

With this in mind, sign up with a reliable brand that comes recommended. Use our list of suggested brokers to start on the right foot.

Leverage

The leverage aspect of CFD trading can make investing risky. Beginners may not want to use all the leverage offered by an online broker. It’s also worth testing trading on leverage in a demo account before investing real money. This will help you understand the impact leverage can have on potential profits and losses.

Note, many of the top CFD brokers will lower your available leverage if you contact their support team.

Bottom Line On CFD Trading For Beginners

CFD trading for beginners can be a lucrative way to get into investing in the financial markets. Traders make a simple prediction on the value of an asset without actually taking ownership of the stock, precious metal or currency, for example. Trading on margin also means novice investors can get started with a relatively small capital outlay.

Use this beginner-friendly guide to trading CFDs to get started today and check out our list of recommended brokers here.

FAQ

What Are CFDs?

CFDs are contracts between an investor and a financial broker where both parties agree to exchange the difference between the opening price and the value of the asset when the contract is closed (minus any fees). CFDs are usually traded with leverage, meaning clients only need to put down a small amount of the total position size.

What Markets Can CFDs Be Used To Speculate On?

Novice traders can use contracts for difference to speculate on a long list of markets, from equities and commodities to forex and cryptocurrencies. Market access varies between brokers so make sure you check out reviews and ratings before opening a live account.

It is legal to trade CFDs in the United Kingdom. However, not all online brokers and trading platforms are regulated by the country’s financial watchdog –  the Financial Conduct Authority (FCA). Trading CFDs with a regulated firm normally provides retail investors with better trading conditions and greater customer protection.

Can You Make Money With CFDs?

Trading CFDs can be profitable, but it can also lead to large losses. The leverage element, in particular, makes contracts for difference a risky product. That’s why beginners may want to start with a demo account to build up their market knowledge and confidence.

Is CFD Trading Good For Beginners?

CFDs appeal to beginner traders for several reasons. Firstly, most brokers offer leveraged CFD trading, so investors only need to deposit a small amount of the total position, usually between 5% and 20%. CFDs are also a derivative, meaning traders don’t actually take ownership of the underlying asset, for example a precious metal like gold or silver. CFDs are also available on a wide range of traditional financial markets, plus new markets like cryptocurrencies.