High Risk Forex Trading Australia From A-z

A Contract For Difference (CFD) is a derivative trading instrument that enables you to trade the price movements (when you write and exit a trade), without owning the underlying instrument, in most cases shares or equities but also indices and forex.

CFD trading is virtually the same as to full price share trading except that when you trade a CFD you do not own the actual share. If you trade a CFD on the Commonwealth Bank or BHP Billiton, you’re trading the price difference between your entry point and your exit point. You do not own the Commonwealth Ban or BHP Billiton shares, you’re only counting on their price moving up or down.

Knowledge about the online forex trading is a must, with a view to do any meaningful forex trade via the internet because as said earlier this is a risky venture in which you can make supernormal profits or supernormal losses. All currencies trade in pairs but the major ones are generally the chief focus in the international forex trading. They include Euro (EUR), United States Dollar (USD), Great Britain Pound (GBP), Japanese Yen (JPY), Australia Dollar (AUD), the Swiss Franc (SWF) etc. The values of all the currencies for various reasons fluctuate up and down and that’s why the prices of every currency are cited in the buying or bid price and the selling or ask price.

High Risk Forex Trading Australia Overload?

In the normal state of affairs, the fluctuation shouldn’t however be too much. A high valued currency is usually associated with a lower valued currency and the following combinations of currencies are very widespread in the international forex markets: USD/JPY, GBP/SWF, EUR/USD, GBP/USD etc. The online trading of currency will help you to know more about money; you should however have adequate information on the means to do it and that is why starters and inexperienced should be headed by a well established forex company.

Share CFDs are the most frequent type of CFDs is however there are likewise other CFDs for Sectors, Indices and other financial instruments such as commodities and treasuries. A full list of tradeable CFDs will be found in on your provider’s website.

Since CFDs were introduced in Australia in late 2001 the number of CFD traders has increased daily. The value and volume of trades backed by CFDs have also increased dramatically. There are estimates that about 10-15% of all transactions in the Australian Stock Exchange are now backed by CFD trades. In the UK, where CFDs originated, it is estimated that CFD-backed trades account for about 25-30 per cent of equity trades in the London Stock Exchange.

Since CFDs were introduced in Australia in late 2001 the number of CFD traders has increased daily. The value and volume of trades backed by CFDs have also increased dramatically. There are estimates that about 10-15% of all transactions in the Australian Stock Exchange are now backed by CFD trades. In the UK, where CFDs originated, it is estimated that CFD-backed trades account for about 25-30 per cent of equity trades in the London Stock Exchange.

The growth and popularity of CFDs has been tremendous over recent years and now there are more countries accommodating these financial instruments to be made available and tradeable in their jurisdictions.

All financial instruments from the simplest to the most complex have their own individual features that make them attractive or not attractive to investors. Though there is a misconception that derivatives are all about high risks, but if considered properly and traded according to your personal risk profile, derivatives including CFDs may play an important role in growing your investment portfolio.

Can be traded long or short-it’s one of the most attractive features of CFDs because it means you can trade long and make money on a rising market or trade short and make money when the contract is falling. (Short trading and its mechanics is explained in more in detail in Chapter 3) Dividend payment-similar to dividend paying shares, CFDs also pay dividends on long positions.

Most CFD providers even pay the dividend amount on the day of distribution. This makes it even more attractive because you do not have to wait for weeks or months before you take your cheque in the mail or before the amount is taken into account in your bank account. No expiry  unlike other derivatives that have expiry date and that become worthless upon expiry, CFDs do not have expiry date. This means you can hold CFDs for as long or as short a period as you like. The price of the CFD moves as the price of the underlying share, like shares/equities.

As a financial instrument, CFDs possess some features that make them attractive to traders and investors alike.Easy to understand and easier to trade-CFD trading has often been described as share trading with bells and whistles. This is because everything you know about shares and share trading applies and can easily be used in order to trade CFDs because the price of CFDs moves as the actual share price moves. For example, if share ABC is worth $5.00, a share CFD on ABC is also $5.00.