Contracts for Difference

On BITmarkets, you can trade shares, commodities, and indices, with additional assets and instruments added regularly as they become available. This provides trader with the flexibility to explore new markets and diversify trading opportunities.

CFD trading lets you trade the price movements of an underlying asset without owning it. When a trade is opened, a contract is created to exchange the difference between the asset’s price at the start and at the close of the trade, which is why it’s called a Contract for Difference.

CFDs make it possible to trade with leverage, allowing you to use a smaller amount of capital while still accessing the potential of the market. CFDs provide many of the same opportunities as trading shares, commodities, or indices, without the need to buy the underlying asset.

With CFDs, you can explore a wide range of markets in a flexible and accessible way, giving you the chance to diversify your trading across different asset groups and manage your capital efficiently.

Trading a CFD begins by selecting an asset offered by the broker, such as a shares, indices, commodities, or another available instrument. Once the asset is chosen, the position is opened by setting key parameters, including the trade direction (long or short), leverage, invested amount (margin), stop-loss, and other settings depending on the broker. The broker then provides the opening price and details any additional fees, such as overnight charges. The position remains open until it is closed, either manually by the trader or automatically. Automatic closure may occur if a stop-loss or take-profit level is reached, or if the contract expires. When the position is closed, any profit is paid to the trader, while losses are settled with the broker. The outcome is determined by the difference between the asset price at the opening and closing of the trade.

Leverage allows you to use your capital more efficiently by only putting up a portion of the total position value, known as margin. When trading with leverage, profits and losses are calculated based on the full size of your position, not just the margin invested. Leverage can significantly increase both potential profits and potential losses, so it is important to use it carefully and understand the risks involved.

Going long, or opening a long position, is a trading strategy where a trader buys an asset with the expectation that its price will rise. Profit is made if the value of the asset increases. Long positions are the most common way to trade and can be combined with other strategies.

Short selling, or going short, is a trading strategy that allows a trader to profit when the price of an asset declines. By opening a short position, gains are made if the value of the instrument falls. This approach is also often used to protect or hedge other investments against potential losses.

Certain financial products such as CFDs derive their value from other assets rather then existing independently. The underlying asset is the real financial instrument, for example, a barrel of crude oil, shares or a currency pair, that determines the value of the derivative. The price movements of the underlying asset directly affect the value of the CFD. While the underlying asset can be purchased and owned, a CFD is a contract based on it and does not provide ownership. This allows traders to participate in market movements without holding the actual asset.

CFDs do not have a set expiry date, which means positions can be held for as long as desired, whether going long or short. However, CFD trades come with spreads and overnight fees, so holding a position for an extended period can result in additional costs.