For those who are just getting started with contracts for difference the first question we get asked is how do I buy contracts for difference? Making your first CFD trade is easy and only requires a couple of initial steps.
- Finding a CFD broker
- Depositing funds
- Download software and begin trading
Before we get into the topics above we will first establish what is a contract for difference? A CFD or contracts for difference is a derivative product that mirrors the performance of the underlying stock or index you are trading. A CFD is exactly like trading shares except you need a small amount of money upfront to control a much larger position size. For example, to trade $10,000 worth of a ANZ share CFDs you may only need $500 of your own money in order to control the full $10,000 position. This is known as CFD leverage.
Now that we know what a CFD is let's move on to the three points mentioned above.
Finding a CFD broker
The first steps before you buy a contract for difference is to establish a CFD broker. In Australia the CFD brokers are very competitive and offer some incredible opportunities just for opening a free CFD trading account. This article is not about finding the perfect CFD broker but instead the initial steps it takes to open your CFD trading account. Once you have found your CFD broker you will need to provide two forms of ID including your drivers licence and a utility bill and to have filled out your CFD application form. Once the compliance department has given approval for your account you can move on to the next stage.
The next part is very easy and requires you to transfer funds from your bank account or credit card to your new CFD trading account. Most CFD providers allow you to open your account with as little as $1000. As you are just starting out $1000 should be sufficient. You can usually deposit your funds via credit card or BPAY. Now you are ready to go.
Download software and get ready to place your 1st trade
Once you have deposited your trading funds you will need to download your CFD brokers trading software which is very easy. Now that you have your trading account set up and the software downloaded you can place your first trade. Remember, when starting out trade very, very small and build confidence in your trading methodologies.
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