Trade CFDs with City Index Using this Easy-to-Follow Guide

LONDON, April 2, 2012 /PRNewswire/ --

A CFD, or Contract for Difference, is an agreement between two parties to exchange the difference between the opening price and closing price of a contract.

They are used by traders to speculate on the future price movements in a market, regardless of whether the underlying markets is rising or falling.

As an example, if a trader believes a market will fall, they may choose to sell and 'go

short'. If they are correct and that market falls, their profits will rise in line with each fall in price from the point at which they sold at. Alternatively, they will net a loss for every increase in that market's price.

Another option for traders choosing to trade CFDs with City Index is to hedge their portfolio; offsetting any potential loss in value of their physical investments.

Easy-to-Follow Guide to CFD Trading

Know your Market

With over 12,000 markets to trade, it is important that you choose a market that you understand.

By knowing your market and how it moves, you will have clearer view on the direction of possible price movements, ultimately guiding your price actions, i.e. whether you choose to go long and buy, or go short and sell.

Something as simple as keeping up-to-date with the financial news, share prices, stock market changes and company reporting dates, can affect your trading choices.

Realistic Targets

Through a comprehensive trading plan, you should outline your trading targets. These targets should be realistic and put in place before you place a trade.

As a whole, your trading strategy should provide you with a general set of rules, to use as a reference point as you begin, and continue, to trade.

A strategy should cover these key areas:

• Profit goals (by day, month and year)
• Size of the trade

• Maximum losses you are prepared to take
• Entry/exit point

Manage Your Risk

You can manage your risk effectively through tools provided as a City Index trader.

The easiest way is to apply stop losses to your City Index CFD Trading account.

You can choose between a Standard and Guaranteed stop loss order; with the latter offering the greatest protection, specifically if gapping occurs in your chosen market.

A guaranteed stop loss is an order to close out a position at a level prearranged by you.

There is a small charge, which can vary across different markets, for providing this added protection.

Summary

Prepare for trading CFDs by creating a comprehensive trading strategy, gaining knowledge of your chosen market and practicing with a demo cfd trading account.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.