CFD Trading in the UAE

Contract for difference (CFD) trading first emerged in the early 1990s and is now a firmly established concept in trading circles. It is typically seen as higher risk than other strategies, and as such many successful traders are experienced individuals backed up by a wealth of expertise.

CFD trading is where a buyer and a seller enter an agreement to exchange the difference between an asset’s when the contract opens and when it closes.

CFD traders do not own the asset, which is a key distinction from traditional share trading. Instead, they are essentially making a prediction on whether an asset’s value will rise or fall.

CFD trading is executed on margin. This means traders are only required to put up a percentage of the position’s value rather than its entire worth.

If a trader thinks an asset is set to increase in value, they will open a buy position. If their prediction proves accurate, they can choose to close the contract and make a profit. By contrast, if the asset’s market price falls below what they paid, they need to make a decision on whether to close the contract and take their losses or hold and see if the value recovers over time.

The same concept works in reverse. So, if a trader believes an asset’s price will fall, they can open a sell position. If the market trends as they forecast it would, they’ll stand to make a profit. But if their expectations are confounded and the asset’s value rises, they will suffer a loss.

It’s crucial for you to develop a comprehensive understanding of CFD trading before you begin to operate in the markets for real. Most successful CFD traders are hugely experienced operators with well-established strategies. You may not want to measure yourself against them, but it’s still vital to carry out detailed research and analysis before starting your online CFD trading journey.

CFD trading offers opportunities for reward but it also brings a certain amount of risk. Because it is done on margin, professional clients could stand to lose more than the initial capital they put up to take a position. Retail clients, meanwhile, benefit from our negative balance protection.

Being alive to other determining factors such as fluctuations in supply and demand or geopolitical and economic issues will also help you understand the risks of CFD trading. You can use that information to create strategies that will help to safeguard against those risks.