Contract For Difference, or CFD trading, focuses on the price of one asset, usually a financial instrument. You can make money whether the price rises or falls, providing you predict the price movement correctly.
Of course, you need an account with a reputable broker, such as Fineco to undertake CFD trading. That’s a fundamental requirement, as is the knowledge that prices can change quickly and you can lose a significant amount of funds, as well as make substantial gains.
As with any type of trading, make sure you only invest funds you can afford to lose.
The Relevance Of Current Global Events
Global events cause market fluctuations. For example, the Ukraine-Russia war has caused the price of gold to rise rapidly. If you had anticipated this you can have made a significant sum.
The reason behind this is simple, sanctions placed against Russia have devasted their economy. As the ruble has crashed in value people have seen their net worth crash. To protect the money they have, these people have been removing funds and purchasing gold as this is seen as a safer financial medium.
Whenever demand increases and supply is limited, the price will go up. Hence, the price of gold has risen dramatically.
Other global events that can affect the price of financial instruments and stock assets are strikes, environmental disasters, take-overs, and even limited durability.
There is always something happening in the world, the question is in which way will it affect your CFD trading.
How To Read Global Events When CFD Trading
Learning to read global events is essential if you want success as a CFD trader. But, you can’t simply wait for something to happen to choose the price direction of your short or long-term trades. The key to successful CFD trading is to consider the impact of a potential event and the likelihood of that event happening.
For example, with the Russia-Ukraine war, fear has driven people to transfer their wealth into more stable assets. This is a fear of net worth shrinking. The same is true when companies strike, a fear of lack of supply will cause panic buying and a price increase.
Fear drives how people respond. This influences the demand for a product and, as mentioned, the greater the demand the higher the price will go.
What you need to do is look at developing situations across the globe and decide what will happen if they develop fully when this is likely to happen, and how this will affect demand. An increase in demand will encourage prices to move upward, a decrease takes them down.
CFD brokers provide traders with the opportunity to speculate on price movements of various financial instruments, including stocks, commodities, and indices, without owning the underlying assets, allowing for both potential profits and losses based on market fluctuations.
Final Thoughts On CFD Trading And Global Situations
Demand is what ultimately causes price movements. But, governments will seek to stabilize prices whenever they can. You need to consider the economy and how your government may react to suppress price increases, or even encourage them.
This will help you decide which way to trade and get the most from your CFD trading experience.
