Q. What does CFD stand for? A. CFD stands for "Contracts For Difference"
Q. What does going LONG mean? A. Going long means BUYING the shares or the stocks you think are going to go up.
Q. What does going SHORT mean? A. Going SHORT means SELLING the shares or the stocks which you think may go down.
Q. What do they mean when they say you have an OPEN POSITION? A. It means you have opened a TRADE by either having gone SHORT or LONG.
Q. What does it mean when they say CLOSE your position? A. A SHORT poistion is CLOSED by GOING LONG and a LONG position is CLOSED by GOING SHORT by the same amount of stake put on the chosen equities when you first opened the trade.
Q. What do they mean by Margin Trading? A. In CFDs the initial money which you would require to put down in order to open a position is called Margin. The amount of margin varies from 1% to 30% depending on which instruments you trade or Brokers you trade with.
Q. What does a MARGIN CALL mean? A. It is a request for further funding of your account which is sent by your broker in order for you to be able to hold on to your open positions.
Q. What do they mean by a "STOP LOSS"? A. Most traders normally use a means by which they can limit their losses by deciding how many points they are prepared to let go against their positions before they exit that position. This provision is referred to as a "STOP LOSS".
Q. Why is trading in CFDs considered to be more risky than the traditional way of trading? A. Because in CFDs you don't really own any shares, you just bet on each point which the stock rises or falls and it is possible for some shares to move against you by a big number, which then gets multiplied by your initial stake and if you lose control over this, your losses can be big- and also in CFDs you could end up losing more than your initial investment.
Q. I don't have much trading experience, do you think I should start trading CFDs straight away? A. No, I beleive you should first try to read as much as you can on the subject and then get yourself a Demo Account and try to gain lots of hands-on experience and then start trading in a very small way and gradually build up on that.
