CFD Trading on Stockity

In this article, we will go over what is a CFD trading mechanic and how it works on Stockity. We will also discuss what a multiplier is and how to trade CFDs, among other information. 

What is a CFD trading mechanic?

CFD trading refers to a method of speculation on an asset’s underlying price, including commodities, shares, cryptocurrencies, indices, forex, etc. The derivative, known as a CFD or Contract for Difference, enables trading in the price changes of financial markets. You don’t possess the underlying asset while trading in this manner. Instead, all you’re presented with is changes in its price.

So, how does CFD trading work on Stockity? 

This trading mechanic allows you to profit from the difference between asset buy and sell prices. Your goal is to forecast whether the asset price will rise or fall. If it turns out correct, you will get a profit — the difference between the opening and closing prices.

How to trade on CFD?

If you’re wondering how to trade CFDs on Stockity, follow these steps:

1. Go to the demo account.
2. Select the “CFD” section in the list of assets once it has opened.
3. Choose an asset that you want to trade.
4. Enter the trade amount; it can range between $1 – $1,000.
5. Set the trade amount and the multiplier – 1, 2, 3, 5, or 10.
6. Choose the “Up” or “Down” depending on your forecast.
7. Click “Trade” to start.
8. Follow the trade in the “Trades” section of the “CFD” tab.
9. At the chosen time, manually close the trade by selecting the “Close” button.

Note! After 15 days after the start of the trade, it will be automatically closed.

What is a multiplier?

A multiplier is a coefficient that multiplies your initial investment. In this approach, you can profit more by trading with an amount far more significant than you initially invested.

For instance, if you initially invested $500 and used a multiplier of 5, you are trading with $2,500 instead of $500 and getting a profit on the $2,500 invested.

FAQs

Below you will find answers to popular questions from traders, which will help you understand how to trade CFDs on Stockity.

Why can I only trade on a demo account on CFD?

CFD is a relatively new trading mechanism on the Stockity platform. Thus, developers are currently working to enhance it. 

The option to trade CFDs on a demo account intends to empower you to test CFD strategies, experiment with indicators on Stockity with virtual funds, and become familiar with the platform’s workings. Once you know how to trade CFDs and leverage tools like Stockity indicators and strategies, you can start trading with real funds. 

Why are trades closed after 15 days on CFD?

Since only a demo account may be used to trade CFDs, 15 days is the ideal amount of time to learn how Stockity works and how to use its indicators and strategies. 

You might think about automatic closure to fix the profit if you want to keep a trade open longer. After closing the previous one, you can also start a new trade with the same volume.

Why is the commission charged on CFD, and how is it calculated?

CFD trading requires you to pay a commission deducted from the demo account. The Stockity platform imposed this fee to replicate trading on a real account. It allows you to practice the skill of financial management, which is crucial when using CFD mechanics. 

A set fee of 0.02% of the trade volume is typically deducted from the demo account when one opens a CFD trade.

How to calculate the profit and loss of a CFD trade?

You can use the following formula to calculate a CFD’s profit and loss:

Investment x multiplier x (closing price/opening price – 1)

For instance, you invested $200 and picked a multiplier of 10. When you opened the trade, the asset value was 1.2000. However, at closing time, it increased to 1.5000. It is how you will calculate the profit and loss:

$200 x 10 x (1.5000 / 1.2000 – 1) = $200 x 10 x (1,25 – 1) = $500

So, $500 is a profit of the trade. The trade was successful since the closing price exceeded the opening price. The maximum loss on a trade can be up to 95%. 

Here’s how you can calculate the loss. You invested $600. You can calculate the trade result using the formula 5% x $600 = $35. Therefore, the maximum loss you may experience before the trade is automatically closed is 95%, or $570.

You can calculate the maximum percentage of alteration in the asset value (before the closing) using the following formula:

Maximum loss/multiplier

95% / multiplier of 10 = 9,5% is the maximum percentage of alteration in the asset value.

Is CFD trading right for me?

CFD trading is an excellent option for those who want to trade in rising or falling markets. It is also suitable for those who want to open a position using margin. However, one wrong move can result in a loss, so you must only trade with real funds when you have done ample practice and know how the Stockity platform and the CFD mechaniс work.