In this episode of Truth About FX, Walter dives into CFDs and how to trade them successfully. Did you know that it is illegal to trade them in certain countries around the world? Walter gives some insider information in finding the right broker for you. And the two advantages of trading forex versus other instruments in the market.

Download (Duration: 05:18 / 12.7 MB)

In This Episode:

00:42 – they are illegal01:32 – swing that sucker03:08 – a cheeky way04:06 – bite the bullet

Tweetables:Test your broker

@TruthAboutForex http://fxtr.co/ao" rel="noopener noreferrer">[Click To Tweet].Forex charts are clean  [Click To Tweet].Find the right leverage [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. Somebody asked me how does CFDs work and do you have any tips on trading them successfully? What do you say to that?

Walter: CFDs are only for a few — if you’re listening to this, you’ve never heard the term CFD and you’ve been trading for a while. That is because you are living in the United States. They are illegal so you cannot trade them.

Hugh: Yeah.

Walter: Basically, CFDs are a way for you to get into the futures market without actually having a futures account. You can have better leverage and all that sort of stuff. Although, the leverage I think is about equal now in the States but because forex is basically regulated by the futures guys.

Essentially, you can trade coffee for example or the DAX which is the German Index. The German equivalent like the DAO. You can trade that with your broker but here is the rob. You’ve got to make sure your broker’s choice becomes really important and the reason why is because some brokers are going to be really… They’re going to swing that sucker around. You’re going to look, “The DAO actually didn’t move that much today why did you spike me and stopped me out?”

They’ll tell you this is not the DAO market. If you are trading the DAO as a CFD, you’re trading like a mirage. It’s like a copy of a copy. It’s not really the same. Yes, it’s true. If you look at West Texas crude oil and it goes up, it’s probably going to go up about the same amount on your CFD chart but that is not set on stone.

You really need to look at the reputation of the broker and test them out. The second thing of this is spreads will vary widely too and the amount of the margin that you get. It becomes a little bit tricky to choose the right broker.

Probably almost worth it to just find the right broker for CFDs and only trade CFDs on that platform. That will be my recommendation because when I first started trading them I was like, “Ohh! This is awesome. I have all these extra markets to trade.”

But then I realized really quickly that just because the chart looks like with one broker, it could be really different with your position.