CFD trading: opening positions
If you want to trade in a particular share, Forex, or commodity via CFDs you need to open a position. In this article we take a look at how to open and manage a position. For this tutorial we use of the trading platform of Plus500. Once you are able to open a position and understand the concept of leverage, you are ready to start trading with an online broker.
Risk warning: ‘CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.’
Long or short: buy or sell
CFD brokers allow traders to go long and to go short. If you go long (buy), you make money if the value of the share rises and you lose money when the value of the share falls. If you go short (sell), you earn money as soon as the price falls and lose money as soon as it rises.
If you want to open a position you need to choose the amount for which you want to buy or sell that share. If you want to trade Google with a leverage of 1:4 and a capital of € 1,000.00 you actually buy € 4,000.00 worth of Google shares.
Take profit / Stop loss (2)
It is always advisable to enter a take profit and a stop loss. These are the values at which the position closes automatically. This is the best way to minimize losses and secure profits.
An interesting way of trading is by placing so-called orders. Orders provide the possibility to buy or sell a share at a given price without having to look at it all day long. If you combine orders with a take profit and a stop loss you can as it were develop your own automatic trading strategy, which you only need to look at a couple of times a week to update your orders.
Managing open positions
As long as you have a position opened your profit or loss will be visible. A position can be closed manually at any time; only do this with full understanding and keep in mind to always follow your strategy. It is also possible to adjust other features such as a take profit or stop loss in this section.
Tip: follow the course CFD trading and learn how to trade!