5 popular markets to trade CFDs: A beginner's guide

October 4, 2023

差價合約

CFDs, or contracts for difference, are a type of derivative that allows you to trade on the price movements of an underlying asset without actually owning it. CFDs are popular among traders who want to access a wide range of markets.

But with so many options to choose from, how do you know which ones are the best for CFD trading? Here's a rundown of the most popular CFD trading markets, along with some things to remember when choosing where to trade.

Forex

The foreign exchange market is the largest and most liquid market in the world, and it offers you the opportunity to trade on the price fluctuations of currencies. This makes it an excellent starting point for beginners, as there is always plenty of liquidity and volatility to keep things interesting.

It's important to remember that you're not buying or selling currencies in forex CFD trading. Instead, you're simply speculating on whether the price of a currency will go up or down. This can be a bit tricky to wrap your head around at first, but it's a concept that most traders tend to grasp after lots of practise.

Commodities

The commodities market includes a wide range of resources, including oil and gold. CFDs on commodities allow you to speculate on the price changes of these assets. Many traders use it to hedge against inflation or take advantage of global economic trends.

When trading commodities CFDs, understanding the underlying asset is key. For example, if you're trading oil CFDs, you need to know about the factors that affect the price of oil, such as supply and demand, geopolitics, and weather conditions.

Cryptocurrencies

The cryptocurrency industry is relatively new but has grown popular in recent years. CFDs on cryptocurrencies allow you to trade on the price volatility of these digital assets. Since it's an unpredictable market, practising caution when trading crypto CFDs is encouraged.

Stocks

Stock CFDs are a type of derivative that allows you to trade on the market trends of individual stocks without actually owning the underlying shares. The amount of money you can make or lose from trading stock CFDs depends on the size of your position and the movement of the stock price. This makes stock CFDs a great asset for both long-term investors and short-term traders.

Stock indices

Indices are baskets of stocks that track the performance of a particular market or sector. Indices CFDs allow you to trade on the price movements of these baskets of stocks. Traders can get exposure to a specific market or industry without picking individual stocks.

Choosing the right financial market for you

The best market for CFD trading will vary depending on your circumstances and preferences.

Here are some additional thoughts traders keep in mind when choosing a market for online CFD trading:

When entering financial markets, traders often take into account their personal risk tolerance, as some markets tend to be more volatile than others.
The timeframe of one's financial goals also plays a role, with some pursuing short-term gains while others aim for long-term growth.
Performing thorough research on the various markets and price drivers is commonly part of a trader's preparation.
Beginning with a small account size can assist traders with managing their overall risk exposure.

CFD trading for beginners has the potential for success, but it's critical to remember that risks are always involved.

Whatever market you choose to start, you can practise by creating a demo account before trading with real money. Create a free demo account with Deriv today, and try CFD trading on Deriv MT5 or Deriv X.

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