CFD trading
Learn CFD trading for beginners and CFD trading - Our guide for learning CFD trading for beginners and CFD trading provides you with the necessary expertise to get started quickly with CFD trading strategies.

Nowhere else than on the stock exchange, many billions of euros are converted every day. In addition to well-known investments and forms of investment such as stocks and funds, there are also other options such as trading binary options, forex, cryptocurrencies such as Bitcoin or CFD trading. Trading CFDs in particular is very interesting for risk-experienced investors.

What is a CFD?

CFDs are contracts for difference (CFD). These are extremely popular with traders and offer extremely diverse opportunities. Trading takes place away from the real stock exchange. As a trader, you speculate on price changes. So-called CFD brokers enable complete processing in real time. Traders speculate on a rising or falling price. CFD exists in various forms such as:

  • shares
  • indices
  • Currencies
  • Raw Materials
  • ETF
  • options
  • crypto currencies

You can usually open an account with a CFD broker with a small amount of equity and get started right away. Because of the leverage effect, profits and losses are also considerably higher than with alternative speculations in the stock market. But the losses can also be higher.

CFD - short explanation

  • CFDs are contracts for differences and belong to the general group of derivatives
  • It is not invested directly in commodities, stocks or the like, but speculates on the course of the price
  • With a small investment of capital, the volume can be increased thanks to leverage
  • The times for trading are identical to the regular exchange
  • There is a risk of total loss and claims from the broker if the leverage is set too high and a loss becomes apparent
  • A kind of risk management is essential to keep the risk at a "normal" level
  • There are basically two options: short and long tail CFD
  • Price trends are modeled and mapped exactly 1: 1 on the “real” stock exchange

5 important facts about the CFD in the overview

  • CFDs are contracts for difference that are traded outside the stock exchange
  • Here, the difference between the initial value and the final value is speculated
  • In principle, falling and rising courses can be used
  • With a lever, far higher profits but also losses are possible
  • The CFD has no due date

How are CFDs traded?

The most important feature of the CFD is the fact that you as a customer do not act in this sense. So you do not trade and do not trade shares or the like. You speculate on the difference between the underlying (value of a share, commodity, etc.) and the future end value after your chosen period.

Example of trading CFDs

  1. XYZ shares have an underlying of EUR 11 at 76,45 a.m.
  2. XYZ share has a final value of EUR 15 at 77,55 p.m.
  3. The difference (contract for difference) amounts to 1,10 euros
  4. You are speculating on this difference between two base values
  5. You can speculate on the period and an increase or decrease
  6. The gain or loss is calculated from the difference in the traded underlying. With the help of levers, the risk but also the profit margin is significantly increased

What is a lever?

Leverage is generated because, as a trader, you only invest part of the amount invested with your broker. Your broker does the rest. Profits and losses are passed on 1: 1. Let's take a few examples of what a CFD trade might look like.

Example of leverage

  • You speculate on a downward movement in the German stock index (DAX)
  • As an investment, you prefer 1.000 euros and you use a freely selectable lever of 100: 1
  • The lever (leverage) moves sums of 100 × 1000 euros (100.000 euros)
  • If the DAX actually falls by one percentage point, this corresponds to a profit of 1.000 euros. (100.000 euros x 1 percent)
  • However, if the DAX rises by one percent, the investment is lost
  • So you invest sum X and choose a lever. Then speculate on a rise or fall in the price. Depending on the difference between the base value and the final value, you can earn large sums extremely quickly and 100 percent profit is not uncommon.

Advantages and disadvantages of CFD as a financial instrument

Because of the above facts, there are many advantages but also disadvantages.

Advantages of CFDs

  • High winnings with little wagering
  • Only a fraction of the investment has to be made with the broker
  • Rising and falling prices are tradable
  • In principle, a deposit guarantee is provided
  • Stocks, commodities, forex, indices and more possible
  • Various levers and possibilities
  • Demo accounts to practice with

Disadvantages of CFDs

  • High risk of loss
  • Regulation and monitoring is less than in regular stock trading
  • Sometimes higher fees
  • Charges apply for overnight stops

There is a small shortcoming (if you can call it that): CFDs are not really suitable as a long-term investment. It is a short-term instrument, but trading is a lot of fun.

Nevertheless, it must be clearly emphasized that: CFDs are a speculative financial instrument and even the total loss of capital is at stake. This also applies, for example, to casinos, sports betting and all speculative stock transactions such as binary options and cryptocurrencies.

Important: Use a demo account to gain experience. Before you jump into CFD trading, you should definitely use a free demo account to gain more experience.

CFD trading - this is how trading works

In principle, CFD trading is about trading assets. In addition, you will "play" with the price fluctuations without owning the assets yourself. CFD stands for "Contracts for Difference", which represent price formation and do not require the direct purchase of the security. That is also one of the main advantages in this business. However, a basic understanding is required to successfully trade CFDs on the stock exchange.

With just a few clicks of the mouse and simple on your home PC, you can dare to start and speculate on the stock exchange. The brokers offer all relevant information in real time and you as a customer have to familiarize yourself with this topic. Basically, all common tradable assets are freely available.

  • Raw Materials
  • shares
  • indices
  • Anleihen
  • pensions
  • interest
  • Currencies

The principle is explained in more detail using the following example so that you can better understand how it works:

The XYZ share is listed on the Xetra trading platform at a value of EUR 10. Your broker delivers a CFD on this stock. Here, too, the real-time market value of the XYZ share is EUR 10. Finally, all statistics and courses are shown in real time. Your specific broker requires a 10 percent margin to trade this stock. As an investor, you can open a long position in the contract from as little as EUR 1. Exactly from your "use", the course develops statistically exactly like the real and real course. In CFD trading, the price is always replicated precisely.

As soon as the price of the XYZ share rises by 10 percent, the value of the contract for difference amounts to 11 euros (+10 percent). But because you only wagered 1 euro, you made a profit of 100 percent. If you were to invest 1.500 euros and the price rose by 10 percent within the time span, 1.500 euros (100 percent profit) would be in your brokerage account.

However, the risk must also be emphasized. With a falling rate of 10 percent and a stake of 1.500 euros, the money would be lost. Thanks to many different levers, you can compensate for the margin between profit and loss. This is exactly the crux of the matter: the levers in CFD trading make the difference. Pay attention to the right levers.

Larger levers promise higher profits but also entail the risk of higher losses. The leverage results from the margin requirements (varies depending on the provider). Conversely, as a customer, trade against your own broker in terms of real-time prices.

Trading with CFDs has a certain risk. This issue needs to be addressed very clearly. High profits face high losses. Nevertheless, this speculative business can be worthwhile if you get an overview of the market.

  • Make extensive use of statistics
  • Always keep an eye on courses
  • use all broker training courses
  • See real-time graphs

There is no obligation on the client to trade or negotiate underlyings. Only a payment of the course development is part of the general terms and conditions. There is also no entitlement to dividends on long positions. However, many brokers pay their customers a dividend if the CFD is held long-term and the price develops splendidly so that a dividend is distributed.

The individual brokers have various options for structuring their CFD differently. At least practically, underlyings are often shown, which can also be traded on futures exchanges.

Which broker is right for CFD trading?

As a potential customer, always look for a suitable CFD trading platform. Various aspects are considered here:

  • favorable conditions of the broker
  • reputable brokers that are regulated and certified
  • Broker with enough liquidity
  • Order execution speed
  • always keep the risk in mind
  • Only invest capital that can also be dispensed with in the event of loss

If you choose your broker wisely and always invest only affordable capital, you will at least minimize your personal risk and run the risk of bankruptcy through speculation.

Beginner's explanation - CFD trading and strategies

Basically, CFDs are contracts between investors (customers like you) and the respective brokers. They are regulated and traded over the counter. There is no uniform standard as on the regular stock exchange. Instead of paying the order in full, in the sense of buying shares, the investor only has to pay a small security deposit. This creates these diverse levers. For example, you invest 100 euros in a CFD, but trade, for example, 500 euros. The profits from the 500 remain with you, but also the loss in return.

These levers enable you to make high profits with small sums. Despite the small investment, you can move larger trading amounts. In CFD trading, traders only use a fraction of the full underlying. This is enough thanks to the levers for an order. Here you have to speculate whether the price will rise or fall. There are also differences in CFD trading:

  1. Longtail position: CFD replicates the ownership of the underlying. If the price rises, this leads to an increase in the asset position of the holder
  2. Short position: replicates the short purchase of a share and investors benefit from a negative price development

Fundamentally, CFDs can be traded indefinitely. With a sophisticated strategy, orders over several months are quite common and popular. Many levers allow creative freedom for your trading movements. When calculating the estimated profit (profit), not your invested capital is used as a basis, but the total value of the position.

Leverage, margin and margin calls

Leverage can have a positive and negative effect for you as a customer. High profits with minimal capital investment, high losses and possibly even an obligation to make additional payments. The offered levers should be used with caution. If there is a high loss and the existing credit is not sufficient to compensate for it, the “Margin Call” comes into play. The broker can ask you to provide additional financial resources. If you cannot follow this request, you have built up debts in addition to a total loss.

When choosing a broker, pay attention to providers who refrain from a margin requirement. These actually exist and, in return, fewer lever functions are usually offered. In CFD trading there are chances of very high profits with very little stake. However, this business is very risky and high losses and even an obligation to make additional contributions are conceivable.

These opportunities and risks exist

As already mentioned several times, the chances of high returns and the risk of high losses are at the same level. You can make a lot of money and lose a lot of money. Fundamentally, CFDs are speculative financial instruments that are subject to high risk. But there are also some significant advantages that make CFD trading very popular despite all the risks.

One of the advantages is clearly the cost factor. In contrast to other financial models on the stock exchange, investments are not made directly in stocks, raw materials or other assets, but speculated on the course of the price. Furthermore, a small percentage investment is sufficient (a security deposit: margin), from which the leverage is shown. Most of the time you invest on a base value between 1-10 percent of the sum of the value. With different levers you can move much higher sums.

You speculate on a longtail or short position. So either on the rising or falling course. That was all and there are not many more options.

  • Fairly simple financial product
  • Use big leverage to move large sums with little own capital
  • Transparent values ​​and exact representation of the real share price

Despite all the chances of getting a rich return, you should never underestimate the risk. Often the seemingly small investments attract because only a small fraction of the actual value of the underlying has to be invested. The levers do the rest. Levers can not only have a positive effect, they can also do the opposite. The possible losses are not only within the scope of the stake, but within the overall trading volume.

Due to the volatility of the assets, you can take a closer look at price fluctuations in advance and get a first overview. However, financial markets are always subject to fluctuations over which you will never have control. In this sense, CFDs are speculative financial instruments with the chance of high profits and the risk of high losses.

Trading hours in CFD trading

With DMA brokers, the regular trading hours are the same as on the reference exchange. CFD brokers without DMA (Direct Market Access) usually have more leeway and longer trading hours. In this case, for example, trading hours for German securities are even possible until 22 p.m. In the case of CFDs with indices and commodities, the trading hours correspond to the respective exchanges on which these futures contracts are ordered.

Many brokers offer their clients underlyings from all possible regions of the world. As a result, you have to consider the time difference. For example between the USA and Germany. Depending on the time difference, you may therefore be able to act in the middle of the night or very early in the morning.

Currency pairs (Forex), in most cases (if Forex is possible as a CFD), can be traded from Sunday evening to Friday night. For a better overview, it is worth taking a look at the general terms and conditions of your broker. Either here or in an extra document, all trading hours are listed. For example times for:

  • spreads
  • Rollover appointments
  • Deadlines
  • Commissions

Because CFD trading is off-exchange, customers can often request and use brokers access via DMA (Direct Market Access). This means they have direct access to the marketplace and are less dependent on trading hours. Orders will then be placed directly in the order book of the exchange. Here, too, the trading hours correspond to the relevant reference exchange with all time shifts.

Criteria for a good CFD broker

  • Regulated and certified by one of the supervisory authorities
  • Deposit protection of customers' capital
  • General terms and conditions in many languages ​​(of course also German)
  • Transparency on commissions and spreads
  • Versatile range of underlyings such as commodities, stocks, currencies and indices
  • In the best case, a low minimum deposit
  • Very quick payout if you win
  • Different accesses to the broker account such as desktop, app and / or browser
  • Free demo account with all common functions to test the platform

Use this listing as a guide if you are looking for a good CFD broker. In addition, there are other features that distinguish a good CFD broker:

  • low hurdles when getting started
  • Free offers in the area of ​​training courses
  • many tradable underlyings
  • good support available via phone, chat and mail

Many brokers (sometimes dubious platforms) frolic in some island paradise. For the broker, these have the advantage of tax relief. However, no one really knows what the customer funds will look like in the event of bankruptcy and payment behavior. It can make sense to find out about experiences with other customers' brokers in advance. Don't take risks with brokers that are regulated too loosely in a tax haven. Any broker of this type is not necessarily dangerous, but beginners in particular should rely on tightly regulated and certified brokers.

It is important to look at the general terms and conditions in German. Can you read the English language? No? Then stay away from it, because it is about extremely important clauses. You should especially look for the obligation to make additional payments.

Find out about a binding exclusion of the obligation to make additional contributions!

Further restrictions, details and details of the fee structure must be clearly and easily legible. It always makes sense if the broker provides a mobile app. This is a good indication of the service and the broker's concern to really offer the perfect “experience”. Even an extremely high minimum deposit is rather dubious and vague from the customer's perspective. Minimum deposit amount of 1.000 euros and the like are far too high and in this case look for another broker. If no demo account is available, then keep your hands off the provider. You want to put the platform through its paces for free first?

Tips and tricks for the first CFD trades

Beginners in CFD trading should never jump into the "cold water". The following tips and tricks must be observed so that the start is successful and the risks are at least narrowed down and calculated. Use the following guidelines as a guide and check your behavior and attitude to the topic very carefully.

1. Use demo account to gain experience
Long story short, try a free demo account. Here you can find out the actual relationships and use “play money” to carry out the first trades. Take a risk and try the levers. You will quickly find that this matter is not so difficult, but difficult to calculate. Ideally, the demo account provides you with real exchange rates. This also gives you the opportunity to familiarize yourself more closely with the provider's platform. A demo account is a must for absolute beginners!

2. Capital that you can forego in an emergency
Have you found a taste for CFD trading and already have a broker? Then never invest money or capital that you need yourself. Due to the highly speculative CFDs, you may only use capital that you can do without in the worst case (total loss). Do not loot your savings book and clear your account because there are big winnings. That would be an unforgivable mistake. CFDs are not suitable as an investment form at all. The hard saved money for training or further education should also be used for this. But if you can actually accept losses without any problems, the CFD broker is the right choice, because of course there are also high profits.

3. Stay emotionless with CFD trading
Stop your emotions when trading. You won and earned 80 percent return within a few hours? Happiness sets in and the risk increases that you try the same strategy again. What works once, works again or? No, that's the wrong way. Plan for profits and losses. Don't get carried away emotionally to make risky trades with even higher levers. If you find that your feelings are overwhelming and that quick decisions are being made, end the trading day for today.

4. Use further education and training
Use any kind of training and tutorials. Deepen your knowledge in this matter. It is best to learn all the functions in a free demo account and get an overview of the market. Seminars, training courses and courses are plentiful. As soon as you seriously want to do CFD trading in order to generate returns, the time and financial expenditure for further training is also worthwhile. It is better to have invested a little more capital in knowledge in advance than to desperately generate losses afterwards.

5. Accept the first losses (training fee)
Find a broker, deposit 1.000 euros and turn it into 3 euros within 2.000 days. A nice idea but mostly far from reality. Be conscious of the fact that you will pay "tuition". Your experience will increase steadily and over time you will get better. Don't let it get you down (BUT: only affordable capital). With a little irony, initial losses due to decisions that are too quick and simple ignorance belong to the positions: textbook, research and education.

Glossary

Investment products

If you read or hear the word stock market, you immediately identify it with trading stocks. However, there are now a large number of other financial products that are traded on the stock exchange. These include u. A. Bonds, derivatives or certificates. But trading has also developed outside the stock exchange and is becoming increasingly important. The best known products are Forex or CFDs. It is crucial for over-the-counter trading that you can act without a financial broker or financial institution. However, it requires a high level of knowledge about these financial products and their risks.

Below you will find some information, important distinctions, strategic approaches and tips on these products, which are very important for a trade. It applies to all investment products that they are based on basic properties. These include u. A.

  • The buying price
  • the period
  • the profit
  • das Risiko

asset classes

The term asset classes is the combination of financial products with uniform characteristics, such as B. Performance and Risks. This means that changes in exchange technology are the same, or at least similar, for these products. Due to the high number of different financial products, asset classes facilitate an overview of the offer and support the decision of the trader / broker to invest in the right product. The asset classes are also referred to as asset classes. The best-known asset classes are:

  • shares
  • Bonds / bonds
  • CFDs
  • Cryptocoins
  • derivatives
  • Direct trade
  • Funds
  • Forex
  • Futures
  • Raw Materials
  • Currencies
  • Certificates

Definition of asset classes

shares

The most well-known term on the stock market is the share. But what does a share mean in detail? In principle, this is a document that describes a correspondingly defined share in financial capital. A share consists of two parts:

  • the stock mantle
  • the share sheet

The equity mantle represents your share in the financial capital of a stock corporation or, to put it more simply, your right to participate in this company. The share sheet, on the other hand, consists of two parts:

  • the dividend certificate (can consist of several individual documents)
  • the renewal certificate (Talon)

Dividends are determined by companies at their general meetings and the dividend certificate entitles you to pay this dividend. The renewal coupon (Talon) serves as proof of receipt of new dividend coupons if they are used up.

Anleihen

A bond is a security with which certain claims are made. Most of these are fixed-income securities, bonds or debentures. Strictly speaking, this asset class is a simple loan. Companies or the state use this form to raise debt capital from investors. After a fixed term, before the bond is issued, this capital must be repaid with a corresponding interest surcharge.

In English, this form of investment is also known as a “bond”. Since bonds or bonds are also traded on the stock exchange, insiders also speak of the so-called "bond market". Similar to the stock, a bond consists of two parts, the mantle and the bow. Both parts serve the same purpose as the share.

derivatives

Contrary to trading in stocks or bonds, in which money is immediately exchanged for a security, derivatives are a form of contract within a forward transaction. Here, the trades are made in the present, but the trading result will only be fulfilled in the future. Derivatives are based on an expected market value. At first that sounds very complicated, but it is actually relatively easy to explain. Imagine the whole thing z. B. with a car purchase and the following example: You order a new vehicle in a car dealership. You have agreed a purchase price of EUR 40.000,00 and an agreed delivery date in 6 months. On the delivery date you take over the car, pay the EUR 40.000,00 and drive happily from the farm. The deal is done.

Trading in derivatives is almost the same, but ends up with an uncertain outcome. Here is an example: You order 10 securities today at a single price of EUR 25,00. The total order value is therefore EUR 250,00. You agree on a term of 2 months. After the term expires, you will receive your securities and pay EUR 250,00.

Now the risk takes hold:

If the 10 securities have a higher market value at the end of the term, e.g. B. 30,00 EUR single price, totaling 300,00 EUR, you have made a profit of 50,00 EUR.

If the 10 securities have a lower market value at the end of the term, e.g. B. EUR 20,00 unit price, i.e. a total of EUR 200,00, you have suffered a loss of EUR 50,00.

CFDs (Contracts For Difference)

In principle, CFDs, also called contracts for differences, are derivatives. However, in contrast to derivatives, which are already speculative traded, CFDs are extremely high-speculation objects. CFDs are therefore only suitable for very experienced traders / brokers who are aware of the problem of trading with CFDs.

The opportunities for profits are greater than for derivatives, but at the same time the risks for large losses are enormous. Stock trading and trading in CFDs differ in the following points:

Shares reflect the shareholder's share of a company's equity. In addition, the possession of shares means that the corresponding rights and obligations of a share holder are legally secured under the German Stock Corporation Act.

CFDs, on the other hand, are not tied to the equity of a company, but rather to the price development (see section on derivatives). They are also not legally protected. Approx. 75 percent of investors lose capital when trading CFDs.

Cryptocoins

Cryptocoins are a money and payment system from the digital world. Cryptocoins are not considered the official currency. Currencies are “real money” and therefore a tangible means of payment, e.g. B. euros, pounds or dollars. They are issued and managed by central banks in the relevant countries and kept in circulation by banks in the currency area.

Cryptocoins, on the other hand, are not a currency, but an artificially created payment system from the constantly growing digital world. Basically, cryptocoins can also be described as a simple medium of exchange. However, the purpose of this payment system is cashless payment transactions, however without the supervision of the authorities and without the participation of official financial institutions. Strictly speaking, cryptocoins are artificially created money. In order to create cryptocoins, you need a community of users who together define and display the number of financial units. All subsequent financial transactions are then processed and stored on a computer. In order to be able to map this in terms of data technology, a database, the so-called blockchain, is being set up. In this blockchain, both buyers and sellers are directly linked.

Cryptocoins offer two major advantages:

  1. Financial transactions are processed without an involved financial institution
  2. Financial transactions are processed in real time

Two major disadvantages of cryptocoins are:

  1. Large fluctuations in the financial value in short intervals
  2. Difficult start in this payment system due to time-consuming entry options

Funds

This variant of an asset class is relatively easy to explain. A certain number of investors invest their capital in a “money box” and have it managed by a proxy, the so-called fund manager. The common capital is now invested by the fund manager in a wide variety of financial assets, thereby spreading and bundling it into one fund. There are different types of funds. The best known are equity, bond and real estate funds. The diversification of financial products minimizes the risk of losses and the number of investors ensures a fixed financial value. The principle is that a possible loss of one financial product is offset by the profit of another, at least minimized. In principle, however, both profits and losses are distributed equally among the investor groups.

You can trade funds independently. You only need the support of an intermediary or a financial institution to open a custody account on a fund platform. When this is complete, you can start. Funds are managed as special funds. A fund is separated from the capital of a company and managed in an independent custodian (bank). In the event of a bankruptcy of the company, the fund's assets are legally protected. Creditors may not be served from this capital. Even the company cannot, e.g. B. in the event of short-term payment difficulties, access this capital. For you as an investor, funds mean not only a legally protected, but also a safe form of investment.

Forex (Foreign Exchange)

The alternative name for forex is currency trading. Forex describes the trading of all currencies in the world outside of a stock exchange activity. Here too, as with the fund described above, you can start trading directly. For this trade you also need a corresponding deposit at a Forex trader / broker. The principle of Forex is the exchange of currencies depending on their daily value. Since currencies are subject to daily fluctuations, this procedure offers good opportunities for profit optimization. Consider the following example:

The currency ratio between the euro and the dollar today is:

1,00 EUR = 1,2357 dollars
You invest EUR 1.000,00 and receive $ 1.235,70 for it
The next day the currency ratio changes as follows:

1,00 EUR = 1,2310 dollars
You will therefore only receive $ 1.000,00 for your invested EUR 1.231,00
You have suffered a total loss of $ 4,70.

The next day the currency ratio rises again:

1,00 EUR = 1,2427 dollars
You will now receive $ 1.000,00 for your invested 1.242,70 euros
You have made a total profit of $ 7,00.

Futures

Future is a terminated contract between buyer and seller. The obligations that both sides agree with this contract are regulated according to a defined standard. The trading platform is the stock exchange. With this financial product, extremely high profits can be achieved in a very short time. However, there is also a risk of massive losses, which may not only use up the starting amount, but may even exceed it. The handling of futures is therefore carried out only by absolute experts and is generally considered premium trading on the stock exchange.

There are two groups of commodities in futures:

Shares and bonds = Also known as commodity futures
Indices and currencies = Also known as financial futures
Upon conclusion of the contract, buyers or sellers undertake to trade or negotiate (deliver) a specified quantity with a corresponding quality at a certain point in the future. The corresponding purchase or sales price is determined at the time a contract is concluded. The price is based on the current base value of the financial product, which is also contractually determined.

If the underlying now rises up to the agreed end date of the contract, it means a profit for the buyer and a loss for the seller. If the underlying falls by the agreed end date of the contract, the situation is reversed. The seller makes a profit, the buyer suffers a loss.

In order to make these extreme situations a little safer, a precaution has been introduced. Futures are usually traded or negotiated on a profit margin. The buyer does not pay the full value of the contract, but only makes a down payment, which is to be understood as a security deposit and is in a corresponding ratio to the contract value. If the margin increases during the term of the contract and thus the ratio of the contract value to the security deposit already paid, the buyer receives an interest credit. If the margin drops, the seller can request an additional payment for the security payment already made.

Termination of a contract, e.g. B. during an economic crisis is not possible. Both contracting parties are subject to the same rules. Only by reselling the contract can a party evade the commitments made.

Raw Materials

Important: Trading in raw materials is restricted for private investors and is not possible on every stock exchange. So direct trading on commodity futures exchanges is not permitted. But you have alternatives to still participate in these transactions. Use z. B. CFDs or funds (already described) and you can participate in trading virtually indirectly. However, you will not get along without the commitment of a trained trader / broker. On the one hand, this trading variant is also very risky, on the other hand, trading is not possible at all stock exchange locations. The largest trading centers for raw materials can be found in u. A. in Frankfurt, Zurich, Chicago, New York or Sydney.

However, when trading in raw materials, it should be noted that prices can be influenced by a wide variety of factors, which usually have nothing to do with trading, and can lead to violent price fluctuations. Political decisions, wars, riots and natural disasters have a significant impact on prices. So there is no need to point out that trading in raw materials is highly speculative and therefore also very risky.

Direct trade

Direct trading is one of the ways to trade outside of an exchange and its regulations. This variant, also called over-the-counter trading, allows trading in financial products directly. Quite simply: between buyer and seller. An advantage of this trading variant is that you are not exposed to price fluctuations on a stock exchange. You can set purchase or sales prices individually and thus negotiate cheaper prices. However, one disadvantage is that you cannot participate in later positive increases in value. To illustrate the direct trade, an example below:

You want to negotiate part of your financial products. The value of this financial package amounts to EUR 10.000. Ask your house bank to process the sale. OTC trading starts.

Your house bank knows because of its business connections a financial broker who is looking for exactly these financial products. It offers your financial package for sale, but requires the current daily value of the financial products plus a corresponding speculative value as the purchase amount. In total 11.500,00 EUR.

The financial broker agrees to purchase, but pushes the total price down to EUR 11.000,00. The bank agrees to the sale and receives the EUR 11.000,00. After deducting your commission, the house bank will transfer an amount of EUR 10.500,00. You have made a profit of EUR 500,00.

Currencies

First of all, the term "currency" must be defined. Currencies are legal requirements that regulate the corresponding monetary system in the states or economic regions. Probably the most important currencies in the world can be found in the countries or economic regions with a very high economic strength. These major currencies include the dollar from the United States of America, the yen from Japan, the franc from Switzerland, but also as the common currency of the euro from the euro zone.

However, currencies are subject to fluctuations, sometimes more, sometimes less. The reason is usually the economic development of the countries or economic zones. It is precisely this situation that carries the risk when trading currencies.

Another risk when trading currencies lies in the fact that currency speculation can be used to speculate directly. So you can z. B. directly exchange currencies or invest in various funds, especially real estate funds. The more extensive these trading activities are, the greater the likelihood that the value of a currency will change more significantly than is done through the management with key interest rates of the respective central banks. This situation, in turn, can lead to trading against certain currencies, which lose their purchasing power accordingly and ultimately lead to financial crises. Of course, this is accompanied by corresponding losses in purchasing power.

The best example of this is the euro crisis in 2011. Countries such as Greece and Spain were on the verge of bankruptcy and a large number of investors sold their euros and invested in the strong Swiss franc. However, not with the intention of becoming active in Switzerland now, but only to bring the money to safety, or rather to “bunker”.

The result was that the franc lost a massive amount of its value against the euro. Before the euro crisis, the ratio was CHF 1,50 = EUR 1,00. During the crisis, the relationship was almost tied. The result was that products from Switzerland became more and more expensive and loans in foreign currencies became uninteresting.

Certificates

Certificates are financial products that have been specially designed by banks for private investors. Certificates must now consist of at least one, possibly several financial products. Alternatively, derivative financial products can also be included.

From a legal perspective, certificates are nothing more than bearer bonds. At this point, however, there is a risk. If the issuer of a certificate is in financial difficulties, e.g. B. insolvency, a total loss of the deposit threatens. The best example of this situation was the bankruptcy of the American investment bank Lehman Brothers in 2008. So when investing in certificates you should not only pay attention to the values ​​involved, but also to the creditworthiness of the companies involved.

Certificates enable you as a private investor to participate in the development of many underlyings. The range of possible investment products is diverse, as almost every financial product can be integrated into your securities account.

Our tip: To be able to practice trading CFDs under real conditions, Plus500 offers you a free demo account. There you can practice trading CFDs indefinitely with play money until you have enough experience to trade with real money.

Risk warning: CFDs are complex instruments and, because of their leverage, are associated with the high risk of losing money quickly. Therefore, only use funds that you can afford to lose. Up to 76,4% of retail investor accounts lose money when trading CFDs with Plus500. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read also our Risk warning.