CFDs are not a simple trading product: trading with them requires knowledge and understanding. By putting in the work to complete this course, you should now be better equipped to start CFD trading. Let’s run through the new knowledge you have acquired.
This course was focused on introducing CFDs and getting to grips with the fundamentals of CFD trading. Over the span of the five lessons you have completed, you will have picked up a great deal of new knowledge — let’s recap what you have learned.
CFD trading explained
CFDs are a type of derivative that allow you to trade the price of a variety of financial assets. You never actually buy or sell the underlying asset, but instead the CFD is an agreement between trader and broker to settle the change in value of a particular asset.
The CFD advantage
CFD trading offers the following benefits:
- Access to a wide selection of financial markets all through one trading account.
- The ability to go short, so that you can profit from falling as well as rising prices.
- Leverage, allowing you to command a larger amount of asset per dollar deposited.
Important CFD terminology
In the course, we covered an assortment of CFD trading terms:
| Spread | The difference between the sell and buy price of an asset |
| Stop-Loss | An instruction to close a trade if it moves a certain amount against you |
| Take-Profit | An instruction to close a trade if it moves a certain amount in your favour |
| Long position | A way of describing an open buy trade |
| Short position | A way of describing an open sell position |
| Dividend | A payment made by a company, returning a portion of its profits to its shareholders |
The different CFD asset classes
We spent a lesson covering the different asset classes you can trade with CFDs. These include:
- Stock indices
- Currencies
- Commodities
- Shares and ETFs
- Cryptocurrencies*
Leverage and margin with CFDs
Finally, we explored the notions of margin and leverage, running through practical examples to show how margin is a portion of the underlying value of an asset put down for a CFD trade, and how leverage works to magnify profits and losses.
Give yourself a pat on the back for reaching the end of the course! Let’s review what you’ve learned with our question bank.
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This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments.
This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Not all of the financial instruments and services referred to are offered by eToro and any references to past performance of a financial instrument, index, or a packaged investment product are not, and should not be taken as, a reliable indicator of future results.
eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.