The mechanism of trading CFD contracts is more like Forex than binary options. That is, the trader does not earn a fixed percentage of each transaction, but the difference that the price has passed over an arbitrary time. CFD trading strategies are not very different from binary options trading strategies or Forex trading (all the same levels, models, indicators, and news are used).
Like in Forex, there are two prices in CFD trading: ASK (purchase price) and BID (selling price), but not one average (as is customary in binary options).
The process of opening a CFD transaction occurs in four stages:
- The trader must choose when the transaction will be considered open. There are two options here: either the transaction will be opened immediately (at the current quote), or the transaction will be postponed until the schedule reaches a certain price (pending order).
- Next, the trader must choose the size of the investment (or the number of lots). That is, the amount that he is willing to invest in one transaction.
- After that, you can set protective stop loss and take profit orders. That is, to choose upon reaching what profit (or what loss) the transaction will be automatically closed.
- And the last thing to choose is the size of the leverage (the leverage allows you to proportionally multiply the potential income and risks of the transaction).
You can close the deal either manually (at any time), or you can wait until one of the protective orders is triggered. Take profit in case of reaching the established profit or stop-loss – in case of receiving the established loss. This Avatrade customer review will help you learn more about trading CFDs and how to choose a broker.