A cfd (contract for difference) is an agreement to exchange the difference in value of the underlying instrument between the time at which the contract is opened and the time at which it is closed.
Geared products like cfds can help you make the most effective use of your investment capital, but it is important to appreciate that the amount you could gain or lose relative to your initial investment is greater for geared products than for non-geared products.
Cfds are margin-traded products. You only need to deposit a fraction of the notional trade value of the contract, allowing you to make a much larger investment than in traditional cash markets. Your profit or loss is determined by the difference between the price you buy at and the price you sell at. Margin levels required will vary between different CFD products.
The stock indices are the indicators that calculate the price of the quotations from the set of shares of a certain sector.
The indeces serve to compare and provide value and knowledge of the state of the various world stock exchanges.
For example, in Spain the reference index is the ibex 35, which refers to the 35 securities with the most liquidity, while in the USA it is the s & p 500, composed of 500 leading companies with common stock in the United States.
Since the index gives a general overview of a particular market, it can be helpful for traders or investors to gauge the performance of their individual portfolios, so that underperforming assets can be identified and adjusted to be in line with the general trend of the market. For example, if an index has been going up by approximately 5% in the last 12 months but your stock that is included in the index only went up by 2%, you would know that it has not been performing as well as some of the other companies in the mark
Because indices cannot be bought or sold directly, cfds, which are contracts between two parties to negotiate the price difference in the exit and closing of trading operations, are used.
With this system, it is possible to speculate on the direction that a stock index will take and consequently obtain benefits after performing good management.If you wish to trade with leverage, you will be able to multiply your profits, taking into account that if you have losses, you can assume them.