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How Does CFDs Trading Work?

Trading CFDs and Forex may expose you to significant losses

How Does CFDs Trading Work?

A trader’s profit or loss is calculated by the difference between the price he enters into a trade and the price he chooses to exit the position. Prices are always quoted with the selling price on the left and the buying price on the right.

How to trade CFDs

The following five steps are the key to CFDs trading:

Choose the financial instrument - A trader first needs to choose the financial instrument or asset that he/she wants to trade, such as the EUR/USD pair or the S&P 500 index or Gold, etc. Amana Capital offers CFDs across a wide range of financial markets, such as forex, indices, commodities, and cryptocurrencies.

Choose to buy or sell - The trader is the one who chooses whether to buy (go long) an asset or sell it (go short), depending on his/her predictions for a rise or fall in prices.

Enter a trade size - The next step is to choose the size of the trade you want to place. The value of one unit of a CFD can vary depending on the instruments that have been chosen to trade, and on the broker.

Manage your risk - A crucial part of trading CFDs is to learn to manage the risks associated with the process. The primary tool for that are stop-loss orders.

Monitor your position - After placing your trade, it is important to manage open positions and make sure that stop-loss or take-profit orders are in place. It is our duty to disclose that clients trading outside of our EU-regulated entity are exposed to losing more than their initial deposit provided that the market moves sharply against them. Losses can exceed your deposit with your broker because of the use of leverage.

Close your position - If the trade is not automatically closed out as a result of a stop or take-profit orders being triggered, you can close your trade at any point in time and book the profit or loss from the position.

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Trading CFDs and Forex may expose you to significant losses