The cfd meaning can be confusing for some people. It is the abbreviation of contract of difference. Everyone in the stock market world is aware of it. What the beginners confuse is generally who pays to whom at the end?
System of gain
- As stated before, the difference between the opening and closing trades is the gain, but that is not all.
- The buyers usually pay the amount, but if it is in minus, the sender is the one who pays.
The cons of CFD
- Leverage magnifies the profit with CFD, but the same applies to loss.
- Investors whose stocks are losing might get a margin call from their broker asking for more funds.
- It is not highly regulated and is banned in most notable countries like the United States.
What is a simulator?
A free risk simulator runs simulations based on the live market. It is a tool to practice with for those who want to get used to the market. It does not need any real money, so one can confidently try out their new strategies and not worry about losing money at all. Many websites dedicated to stock marketing have it for free, or one can always download any free app.