The metatrader platform is one of the most popular trading platforms in the forex market. In addition to its basic functionalities, the metatrader platform offer traders access to the CFD financial market. In this article, we will compare trading currencies and trading CFDs to understand their respective places in the forex market.
Currency trading is the exchange of one currency to another through a forex trading platform in order to make profits. The act of trading one currency for the other is known as forex or currency trading; and the place where the trading takes place is known as the forex/currency market.
The forex market is the largest market in the world, which is not surprising since traders from all around the world trade therein. Also it is the most liquid market in the world too as heave amounts of money are being accounted for on a daily basis in the forex market.
CONTACT FOR AGREEMENT (CFD)
CFD is an agreement between two parties to exchange the difference between the opening price and the closing price of a contract. Just like the currencies that are traded in the forex market, CFDs are also commodities tradable in the forex market. They are derivatives products that allow traders to trade on live market price movements without actually owning the underlying instrument on which the trade is based. It is still a form of forex trading but not a straight jacket kind of exchange of currencies.
COMPARING CFD AND FOREX TRADING
There are a whole lot of similarities between trading CFDs and currencies, some of which are
Currencies and CFDs are executed on the same trading platform with similar trading tools, pricing methods, and charts.
The trading process for both commodities involves similar trade execution process. There is an entry point, there is a strategy, and there is an exit point.
The cost of trading for both commodities is the spread as opposed to commissions usually charged in other financial markets.
CFD trading is made of different types of contract agreements over different markets like indices, energy, and metal; but forex offers nothing but the trade of currencies.
There are other things about the currency trading that are worth comparing with CFD trading, but the ones listed above will do for now as we take a look at one major benefits of CFDs. In CFD trading, traders make use of leverage that is up to 100:1 to initiate a CFD trade with lower initial capital. With this, traders can gain a lot from the movement of the commodity for a comparatively low cost. Like was mentioned earlier, commissions are not charged in CFDs, rather spreads is all the trader has to pay.
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