Why is indices trading important to traders?

A stock market index is a measurement of a compilation of shares, which tracks and assesses the performance of a particular market’s sector, region or country’s economy in general.

The majority of highly developed, as well as developing economies, have at least one financial index. For example, the S&P 500 index includes the stocks of 500 top-traded companies in the United States. Comprising 70% of the overall financial value of the US stock market, the index delivers a good view on the state of the American stock market as a whole.

Indices

Why trade indices?

Index trading is a relatively secure form of trading with integrated money management. The risks of trading indices are always lower than the risks of investing in individual stocks.

  • Indices are the least manipulative financial instruments. The price of an index changes according to the price fluctuations of the constituent companies that make up that index.
  • Embedded money management scheme. Trading indices, you simply don’t put all your eggs into one basket. With the NASDAQ 100 index, you diversify into the most-prominent American high-tech companies. Choosing CAC 40, you contribute to petrochemical industries.
  • Lower risks. Though indices can also be volatile due to factors like geopolitical events, economic forecasts and natural disasters, an index losing or gaining 10% is already a huge historical event that will often hit the news.
  • No risk of bankruptcy. Unlike an individual company, an index can’t go bankrupt. If a DAX 30 constituent goes bankrupt, it is replaced by the 31st company in the list of leading German companies. However, if you hold shares in this business, you’ll automatically lose your investment.
  • Benefit from the global economic situation. By investing in a basket of companies, you benefit from the positive or negative dynamics of the global economy. If one company fails, the index can still rise.

How to trade indices with CFD

Trading indices is a way to gain exposure to global or regional markets without having to analyse the performance of individual companies. Popular stock market indices usually provide traders with a high degree of liquidity, long trading hours and tight spreads.

One of the easiest and most popular ways to trade indices is with CFDs (contracts for difference). A contract for difference (CFD) is a type of contract between a trader and a broker in order to try and profit from the price difference between opening and closing the trade.

Using CFDs to trade indices will allow you to go long or short the market without having to deal with conventional exchanges. You trade direct with your CFD broker. No matter whether you have a positive or negative view of the index forecast and predictions, you can try to profit from either the upward or downward future price movements.

Made up of a wide cross-section of liquid trading instruments, indices are extremely popular with CFD traders around the world.

How are major indices calculated?

Before we stepped into the digital era, indices were calculated as simple averages, i.e. the prices of all the constituents were summed up and divided by the number of companies. Today this approach may seem too simple, but it met the requirements of its time, providing a reliable view on the strength of a particular market.

Today indices’ values still change according to the fluctuations in the value of its underlying individual stocks. However, indices use the two major formulas to determine their price:

  • Market-value-weighted indices
    Market-weighted, also known as capitalisation-weighted, indices are calculated based on the total market value (capitalisation) of its constituents. It means that the bigger companies have a larger impact on the index. Examples of market-weighted indices are FTSE 100 and DAX 30.
  • Price-weighted indices
    Price-weighted indices are calculated based on the share price of its constituents. It means that companies with higher share prices have a stronger impact on the overall index price. An example of a price-weighted index is the Dow Jones Industrial Average.

Why trade indices CFDs with edufintech.org?

Advanced AI technology at its core: A Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative News Feed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos and articles to help polish your investment strategy. This hopefully helps you refine your approach when you trade the world’s most popular stock market indices.

Trading on margin: Providing trading on margin (20:1 for major indices), Edufintech gives you access to the NASDAQ 100, DAX 30, FTSE 100, Dow Jones 30, S&P 500, CAC 40, Hang Seng 50, ASX 200, Euro Stoxx 50 and many more indices with the help of CFDs.

Trading the difference: By trading CFDs on indices, you don’t buy the underlying asset itself, meaning you are not tied to it. You only speculate on the rise or fall of its price. CFD trading is no different from traditional trading in terms of its associated strategies. A CFD investor can go short or long, set stop and limit orders and apply trading scenarios that align with his or her objectives.

All-round trading analysis: The browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Edufintech provides live market updates and various chart formats, available on desktop, iOS, and Android.

Focus on safety: Captal.com puts a special emphasis on safety. Licensed by the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

What are the world’s top-traded indices?

There are plenty of indices, which concentrate on certain market sectors and stocks. The world’s famous Dow Jones Industrial Average includes the stocks of the 30 major players in particular industries.

Some of the world’s most popular indices are: S&P 500 and NASDAQ 100 (New York), FTSE 100 (London) and DAX 30 (Frankfurt), AUS 200 (Sydney) and Nikkei 225 (Tokyo), CAC 40 (Paris) and Euro Stoxx 50.

Indices

Generally, there are three common types of indices – global, regional and national.

Type of Index Description Leading Indices
Global stock market indices
Tracks equities from all over the world.
For example, the MSCI World index comprises large and
mid-cap equities from 23 developed countries
MSCI World Index
S&P Global 100
FTSE All-World Index
S&P Global 1200
Dow Jones Global Titans 50
Russell Global Index
Regional stock market indices
Tracks equities of certain regions.
These indices may reflect European,
Latin American, Asian equities, etc.
Asia:
  • S&P Asia 50 index
  • FTSE ASEAN 40 index
Latin America:
  • S&P Latin America 40 index
Europe:
  • FTSE Euro 100 index
  • Euro Stoxx50 index
  • S&P Europe 350 index
National stock market indices
Tracks equities of individual countries.
The top 10 national indices include the following:
China: SSE Composite Index
Japan: Nikkei 225
Germany: DAX30
United Kingdom: FTSE 100
France: CAC40 Index
India: Bombay stock market Index
Italy: FTSE MIB Index
Brazil: Bovespa Stock Index
Canada: S&P TSX 60 Index
South Korea: KOSPI Index

Index trading historical data

The very first stock market index was developed and launched in 1885 in the United States. The Wall Street Journal editor and the co-founder of Dow Jones & Company – Charles Dow – started counting the average change in the market prices for the 11 top industrial companies of that time. Since 1928, the Dow Jones index has been calculated as an index of 30 notorious companies on the US stock market.

What are cryptocurrencies and why are they important to traders?

A cryptocurrency is a digital asset conceived for use as a medium of exchange, which uses blockchain technology cryptography to secure transactions, control the supply of additional units and corroborate transfers. In short, cryptocurrency is a decentralised digital currency.

Cryptocurrency is stored in a ‘wallet’, which can take various forms. For instance, Bitcoin can be stored in an online or offline electronic wallet.

Bitcoin was the first cryptocurrency, launched in 2009 by an individual or group using the pseudonym Satoshi Nakamoto, and has since paved the way for many other cryptocurrencies. Bitcoin has shaped the cryptocurrency market as it is today. A few years after Bitcoin launched and gained popularity, many new cryptocurrencies started appearing. These are known as ‘altcoins’. Altcoins are defined as cryptocurrencies that are alternatives to bitcoins.

Altcoins can differ from Bitcoin in a variety of ways. Some may have a different economic model and others may use different underlying algorithms or blocksize. There are cryptocurrencies that offer a more adaptable programming language, so that applications can be built on top of the blockchain. Some altcoins offer nothing valuable at all and all cryptocurrencies should be researched heavily before trading; many people consider the value of altcoins to be derived from the projects behind the cryptocurrency.

Cryptocurrencies have become popular among traders and an asset class in their own right. Their volatile provides ample opportunities for traders to profit and what better time than now to gain exposure to this latest phenomenon.

What hours of the day can you trade crypto, and where?

Cryptocurrencies are a product of the digital society, and just like the digital society, they run 24/7. You can trade cryptocurrencies at any point in the week. Unlike stocks and commodities, the cryptocurrency market isn’t traded on a regulated exchange. Instead, cryptocurrencies can be traded all hours of the day across an increasing number of ‘crypto’ exchanges, such as Binance, Bitfinex or Coinbase Pro.

Although cryptocurrency trades around the clock, there are some periods that are more likely to be busier, however this loose rule of thumb doesn’t always hold. Given that the USA, Russia and the UK are the three biggest crypto trading states, it is unsurprising that the American through European market hours tend to be busy times for cryptocurrency. The Asian market hours can also be very volatile times for cryptocurrency, even on weekends. It is not uncommon to see big moves occur in cryptocurrency prices over Sunday night (GMT); this can be damaging for people trading on European time zones.

The percuilarly thing about cryptocurrency exchanges is the extent to which the price disparity can reach between each exchange. For instance, there have been times where Bitcoin has had up to a $500 price disparity across exchanges. The reasons for this disparity are related to the differences in liquidity across exchanges and often the geographical location of these exchanges. Price disparity becomes more noticeable just after big moves in the price of cryptocurrencies.

BTC

How to trade cryptocurrencies

There are two popular ways to start crypto trading. One way is to buy cryptocurrency on exchanges, such as purchasing Bitcoin on an exchange like Currency.com. Here you own the cryptocurrency yourself and presumably you are waiting for the price to rise significantly so you can sell it for a profit.

Alternatively, you can trade a contract for difference (CFD) on a particular cryptocurrency. A CFD is a derivative product where a broker agrees to pay a trader the difference in the value of an underlying security between two dates; the opening and closing dates of the contract. You can either hold a long position (speculating that the price will rise) or a short position (speculating that the price will fall). For instance, when trading a Bitcoin CFD, you are also speculating on the BTC/USD pairing.

There are crucial differences between buying cryptocurrency and trading CFDs on cryptocurrency. When purchasing cryptocurrency, you store it in a wallet, but when trading CFDs, the position is held in your trading account, which is regulated by a financial authority. You have greater flexibility when you trade with CFDs as you are not tied to the asset; you have merely bought or sold a derivative contract. Additionally, CFDs are a more established and regulated financial product.

Advantages of using CFDs for cryptocurrency trading

Liquidity. Liquidity measures how easily an asset can be turned into cash, without impacting the market price. If an asset is more liquid, it brings about better pricing and faster transaction times. The cryptocurrency market is considered illiquid, partly due to the distribution of orders across exchanges, as noted by price disparity. This means that a relatively small number of trades can have a large impact on market prices; one factor contributing to cryptocurrency volatile. However, when trading CFDs on cryptocurrencies, you can gain exposure a lot easier because you are not trying to buy the underlying asset, simply a derivative product.

Leverage. CFDs can be traded on margin. This means a trader only needs to put down a fraction of the value of their trade, and in essence, borrow the remaining capital from their broker. This allows for more accessibility, greater exposure and amplified results. This can be particularly useful for cryptocurrencies, given the huge volatility the asset class witnesses, but this also brings increased risks.

Ability to go long or short. When purchasing cryptocurrency itself, you can only profit when the market is rising. However, with Edufintech , you can profit in both a falling and rising markets due to the ability to short sell CFDs on cryptocurrency.

Tax-efficient trading. Trading CFDs on a cryptocurrency can offer benefits over holding the cryptocurrency itself. CFDs are useful for hedging your existing portfolio because if your expectations are wrong you can offset any losses incurred with CFDs against the capital gains charged on the increase of your portfolio.

What are the most popular cryptocurrencies?

Aside from Bitcoin, there are numerous other popular cryptocurrencies that you can trade with Edufintech . These include (but are not limited to): Bitcoin Cash, Ripple, TRON, Ethereum, Litecoin, XEM, Bitcoin Gold, Stellar, NEO, EOS, Steem and Quantum. These are all popular choices for individuals that consider cryptocurrency trading.

The most popular cryptocurrencies are Bitcoin, Ethereum, Ripple and Litecoin. Below is some additional information on cryptocurrencies that have not yet been covered.

  • Ethereum

Ethereum is an open platform that enables developers to build and deploy decentralised applications (dApps). The easiest way to think of Ethereum is as a programmable Bitcoin. Ethereum allows participants to run decentralised blockchain applications called smart contracts. Smart contracts are highly secure, and run with the perfect digital history, making them auditable, trustless and unstoppable. These smart contracts can be programmed without any chance of downtime, censorship or fraud. Ethereum is the second largest cryptocurrency by market capitalisation.

  • Litecoin

Litecoin is an early spinoff of Bitcoin created by Charlie Lee in 2011, which is almost identical with respect to Bitcoin’s underlying technology. Litecoin was designed to allow peer-to-peer payments that are instant and very low-cost. It’s one of the top 5 biggest cryptocurrencies in terms of market capitalisation.

  • Ripple

Ripple is a real-time settlement system and currency exchange network created by Ripple Labs that uses their native cryptocurrency, XRP, to process transactions. Ripple is a system for exchanging many different assets digitally, and this is where it differs from cryptocurrencies such as Bitcoin – which was designed primarily as a digital asset to be used as a medium of exchange.

Why trade CFDs on cryptocurrency with edufintech.org?

  • Advanced AI technology at its coreA Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative SmartFeed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos, articles, news to polish your investment strategy.
  • Trading on margin Providing trading on margin (2:1 for cryptocurrencies), Edufintech gives you access to the cryptocurrency market with the help of CFDs.
  • Trading the difference When trading CFDs on cryptocurrency, you do not buy the cryptocurrency itself, meaning you are not tied to it. Instead, you speculate on its price direction. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with their objectives.
  • All-round trading analysis The browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Edufintech provides live market updates and various chart formats, available on desktop, iOS, and Android.
  • Focus on safety Edufintech  puts a special emphasis on safety. Licensed by both the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts. This is a lot safer when compared with some cryptocurrency wallets.

Trading cryptocurrency CFDs with edufintech.org

  • Step 1 Download the Edufintech mobile app or open the desktop version.
  • Step 2 Open an account in GBP (£), EUR (€), USD ($) or PLN (zł) and make a deposit in the corresponding currency.
  • Step 3 Choose a cryptocurrency you want to buy or sell a CFD on.
  • Step 4 Discover handy cryptocurrency charts and rates.
  • Step 5 Open a long (buy) or short (sell) position on a cryptocurrency CFD and speculate on the market’s movements.
  • Step 6 Close your position and withdraw your funds within 24 hours.

Keep in mind that the market can move against you. Trading CFDs is risky.

What is currency trading?

Commonly known as forex trading, currency trading refers to the purchasing and selling of the world’s currencies with the objective of making profits. Unlike stocks or commodities, currency trading does not take place on a regulated exchange and it is not controlled by any central governing body. Instead, forex is an over-the-counter (OTC) market where currencies are traded in financial centres around the globe, such as New York, London, Frankfurt, Tokyo and Sydney. This means the market is open 24 hours a day, with the exception of weekends, giving you the opportunity to trade around the clock.

Currency traders include governments and central banks, commercial banks, other financial institutions and institutional investors, commercial corporations, currency speculators and individuals. Financial centres around the world function as anchors of trading between this wide range of multiple types of buyers and sellers. Trades between the market participants can be extremely large, involving hundreds of millions of dollars.

The forex market assists international investments and trade by enabling currency conversion. For instance, it allows a business in the European Union to import goods from the United States and pay in the US dollars, even though its income is in euros.

Currencies are always traded in pairs. For that, the forex market does not set a currency’s absolute value. Instead, it determines its relative value by setting the market price of one currency if paid for with another. For example: 1 EUR is worth X USD, or GBP, or CHF.

currency trading

Therefore, in a typical forex transaction, a party buys some quantity of one currency by paying with some quantity of another currency.

What are the currency pairs available for forex trading?

currency trading

There are three main types of currency pairs available in the forex market: major, minor and exotic. They are divided into these groups depending on how much they are used daily. The categories consider regular trading activity and liquidity of each currency.

  • Major currency pairs
    Major currency pairs consist of the most frequently traded currencies globally, offering greater liquidity and lower volatility. Those pairs always have the US dollar on one side. There are seven major currency pairs: GBP/USD, EUR/USD, USD/JPY, USD/CHF, USD/CAD, NZD/USD and AUD/USD.
  • Minor currency pairs
    When a currency pair does not include the US dollar, it is called a minor currency pair or a cross-currency pair. Those pairs are less traded than the major currency pairs. For that, they are usually less liquid and have wider spreads. The most widely traded minor pairs consist of the British pound, euro or yen. Some of the examples are EUR/GBP, EUR/AUD, GBP/JPY, NZD/JPY and GBP/CAD.
  • Exotic currency pairs
    Exotic currency pairs usually include a currency from an emerging market country. They are typically illiquid, with fewer market-makers and much wider spreads. Examples of exotic currency pairings include EUR/TRY, USD/HKD, NZD/SGD, GBP/ZAR, NOK/RUB and AUD/MXN.

Why is the forex market important to traders?

The foreign exchange market is the biggest financial market in the world, with a daily turnover of around $6.6trn. The figure’s approximate break-down is as follows:

currency trading

One of the key factors that differentiates currency trading from other types of trading is its exceptional liquidity. Moreover, it is also the largest market in the world in terms of trading volume, followed by the credit market. The sheer volume of currency trading that occurs in a day can make FX markets extremely volatile – and it is this volatility that makes it so appealing to traders. Volatility allows for higher profits but also increases the risks.

currency trading

What hours of the day can you trade currencies?

Forex market activities are conducted across various networks in several markets around the globe; there is no one centralised place to trade currency pairs. Consequently, the market is run by a network of banks working across four different time zones (namely London, New York, Sydney and Tokyo). This allows traders to trade 24 hours a day.

The market is open 24 hours a day from 17:00 (EST) on Sunday until 16:00 (EST) on Friday. The international scope of the FX markets means that there are always traders making and meeting demands for a particular currency.

Historically, the forex market has three peak trading sessions; this is known as the forex three session system. These sessions consist of the North American (New York), European (London) and Asian (Tokyo) sessions. The forex markets are most active when these financial centres are conducting business and their stock markets are open. Sydney stock market hours also affect the Asian trading session. When these sessions overlap there are particular movements in currency pairs that are affected by both open regions. For instance, when the European and American sessions overlap, currency pairs such as EUR/USD and GBP/USD are particularly volatile.

Local time BST (GMT +1) EDT
Sydney open – 07:00
Sydney close – 16:00
22:00 – 07:00 17:00 – 02:00
Tokyo open – 09:00
Tokyo close – 18:00
01:00 – 10:00 20:00 – 05:00
London open – 08:00
London close – 16:30
08:00 – 16:30 03:00 – 11:30
New York open – 08:00
New York close – 17:00
13:00 – 10:00 08:00 – 17:00

August-Winter peak sessions

Local time GMT EST
Sydney open – 07:00
Sydney close – 16:00
20:00 – 05:00 15:00 – 00:00
Tokyo open – 09:00
Tokyo close – 18:00
00:00 – 09:00 19:00 – 04:00
London open – 08:00
London close – 16:30
08:00 – 16:30 03:00 – 11:30
New York open – 08:00
New York close – 17:00
13:00 – 22:00 08:00 – 17:00

How to trade forex CFDs

Since currency trading does not take place on a centralised exchange but on the OTC market, there are two most popular ways an individual can choose to trade forex: either through a spot market or through CFDs.Forex tradingA forex spot transaction, or FX spot, involves the agreement between two parties to buy one currency against selling another at an agreed price within a short period of time. This is a direct exchange between two currencies. Such transactions involve cash. For instance, a FX spot on the GBP/USD pair involves one party buying the pound sterling in exchange for US dollars at the rate determined by the market.

Alternatively, those looking how to trade forex can consider trading a contract for difference (CFD) on a currency pair and speculating on the price difference of the underlying asset. A CFD is a financial contract, typically between a broker and an investor, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade.

Trading currency CFDs gives you the opportunity to trade the forex pair in both directions. You can thus take both long and short positions depending on your market perception. For instance, if you believe the British pound will appreciate against the US dollar, you can open a long position on the GBP/USD currency pair. If you think it will depreciate, you can open a short position.

Advantages of trading forex CFDs

  • Leverage. Leverage can make your wins go even further. You can trade CFDs on margin, meaning you can gain greater exposure for your initial capital. This is done by putting up only a fraction of the value of a trade and essentially borrowing the rest from your broker. This is known as leveraged trading and can amplify your wins as well as your risk.
  • Hedging. Hedging is the technique where someone opens a position to offset any potential loss that their current holdings may incur. The forex market is particularly volatile, which is what attracts a lot of traders. However, some may still want to employ hedging techniques to mitigate loss. Traders can take positions in markets that are negatively correlated, such as holding a long position on USD/CAD to hedge against falling oil prices.
  • Tax-efficiency. CFDs are exempt from stamp duty and losses can be offset against profits in other holdings that contribute to your capital gains tax liability. This is particularly useful when using CFDs to hegde.

Wondering where to trade forex CFDs? Just spend three minutes of your time to sign up and start your journey of currency trading with Edufintech . Try our award-winning trading platform or download our mobile app, which will become your smart CFD trading assistant.

Why trade CFDs on currency pairs with edufintech.org?

Advanced AI technology at its core: A Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative News Feed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos and articles to help polish your investment strategy.

Trading on margin: Providing trading on margin (30:1 for major currency pairs), Edufintech gives you access to the forex market with the help of CFDs.

Trading the difference: When trading CFDs on currency pairs you don’t buy the underlying base currency itself. You instead speculate on the rise or fall of its value. CFD trading is no different from traditional trading in terms of its associated strategies. When trading CFDs you can go short or long, set stop and limit losses.

All-round trading analysis: The browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Edufintech provides live market updates and various chart formats, available on desktop, iOS, and Android. Study live currency pairs within the platform whilst simultaneously browse tailored news based on your trading behaviour.

Focus on safety: Captal.com puts a special emphasis on safety. Licensed by both the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

Follow Edufintech to always stay on top of the latest market developments and discover forex trading tips, analysis and forecasts.

What is commodity trading and why is it so important to traders?

What is commodity trading and why is it so important to traders?

Commodity is the oldest form of financial instruments. Commodities’ market is almost as old as human civilization itself. Historical evidence suggests that rice might have been the 1st commodity around 6,000 years ago. In times of Sumerian civilization (4,500 BC) people used clay tokens as a form of money to buy livestock.

Today, commodity trading forms the basis of the global trade ecosystem. With the advent of online commodity trading, private traders gained access to global commodities markets with relatively modest amount of capital.

Commodities have become a popular means of inflation hedging and portfolio diversification. For many traders and investors, commodity trading is a preferred way to protect funds and reduce the overall risk for their portfolios.

What are the major commodities?

Generally, commodities can be divided into four main categories:

  1. Agricultural commodities, including food crops (cocoa, cotton, corn, coffee, etc.), livestock (hogs, cattle) and industrial crops (including wool and lumber).
  2. Energy commodities, including natural gas, crude oil and gasoline, coal and uranium, ethanol and electricity.
  3. Metal commodities, including base metals (i.e. iron ore, zinc, aluminum, nickel, steel, etc.) and precious metals (gold, silver, palladium and platinum).
  4. Environmental commodities, including renewable energy certificates, carbon emissions and white certificates.

Some believe that cryptocurrencies – unique and extremely popular asset class – can be also referred to as commodities. Though the Swiss Financial Market Supervisory Authority (FINMA) and the US Securities and Exchange Commission (SEC) tend to regulate cryptocurrencies as something akin to shares, many consider real-world commodities as a much better analogue for crypto.

Proving this theory, Bitcoin is referred to as “digital gold” and many cryptocurrencies are “mined”. In the core essence, cryptocurrencies, the same as commodities, are free from outside control and their values are defined by market factors. Besides, cryptocurrencies can be also traded for goods and speculated upon. Having said all this, let’s put them here:

5. Cryptocurrencies, including Bitcoin, Litecoin, Ethereum, Ripple, Monero, and many others.

What is shares trading and why is it important to traders?

Shares are of one of the most popular financial instruments traded today. When you buy a share in a company, you’re buying ownership within that company. When trading shares, you must consider both the company and broader industry that it’s in.

As with any equity, quarterly earnings announcements, as well as the financial performance of the sector and wider stock market, are all crucial factors to watch when deciding how shares will perform. When trading shares you have the option to purchase stocks on the stock exchange or trade derivatives of the underlying asset.

What hours of the day can you trade stocks?

Stock markets have set trading hours where you can trade shares. The hours in which you can trade a certain stock depends on what stock exchange the shares are listed on. For instance, if you wanted to trade stocks in Barclays (BARC) on the London Stock Exchange you can do so between 08:15 – 16:30 (GMT) Monday to Friday. The London Stock Exchange does not close for lunch but most Asian stock markets do. Most stock exchanges run on the Monday to Friday schedule, however, Middle Eastern stock exchanges tend to run Sunday through Thursday.

During out of hours trading it is possible to put an order in on a trade, but as market makers do not participate, it requires a large amount of liquidity for an order to be executed. Here is a table of the opening times of some of the biggest stock exchanges across the globe:

Exchange Opening hours Days Break
New York Stock Exchange, USA 09:30 – 16:00 (ET/EDT) Mon – Fri No
NASDAQ, USA 09:30 – 16:00 (ET/EDT) Mon – Fri No
Tokyo Stock Exchange, Japan 09:00 – 11:30 & 12:30 – 15:00 (JST) Mon – Fri Yes
Shanghai Stock Exchange, China 09:30 – 11:30 & 13:00 – 15:00 (CST) Mon – Fri Yes
London Stock Exchange, UK 08:00 – 16:30 (UTC/BST) Mon – Fri No
Saudi Stock Exchange, Saudi Arabia 10:00 – 15:00 (AST) Sun – Thur No

How to trade shares CFDs

When trading shares you have two options. Firstly, you can purchase actual shares in companies on different exchanges where they are listed. For instance, you can purchase Apple shares on the NASDAQ stock exchange, where you own a stake in the company. This is known as a more long-term approach to trading, where the trader is usually expecting the price to rise over a time frame of months to years. Traditional share trading is popular but lacks the liquidity and leverage offered by derivative products. Since the inception of online retail trading, CFDs on shares are becoming more and more popular.

The alternative to traditional share trading is trading CFDs on shares. You can trade a contract for difference (CFD) on a particular equity, speculating on the price difference of an underlying asset (in this case a share) without having to own it. A CFD is a derivative product where a broker typically agrees to pay an investor the difference in the value of a security between an opening and closing price. Traders can open long positions (speculating that the price will rise) or short positions (speculating that the price will fall). CFD trading tends to be considered a short-term approach to trading, where trades are opened and closed within day to week timeframes, but this does not necessarily mean they have to be short-term. Less commonly, CFDs can be held for months at a time, but this incurs costs such as overnight costs (due to the leverage borrowed).

One vital difference between taking a long position with a CFD and purchasing a security is the ability to make leveraged trades. CFDs are traded on margin, which means that a trader can open larger positions relative to the amount of initial capital they have.

Stock trading

Advantages of trading CFDs on shares

Trading stock with CFDs comes with several advantages and has more diverse uses.

  • Leverage. CFDs can be traded on margin. This means a trader only needs to put down a fraction of the value of their trade, and in essence, borrow the remaining capital from their broker. This allows for more accessibility, greater exposure and amplified results.
  • Hedging. CFDs can be used effectively to hedge against existing holdings. For instance, say you hold a portfolio of shares in a particular industry. You are happy with your investment but are expecting a short, yet sharp, dip in this industry. You are worried this may affect the value of your portfolio. Using CFDs you can short-sell your existing shares, hedging against this possibility. If your expectations were wrong you have the added bonus of being able to offset any losses incurred with CFDs against the capital gains charged on the increase of your portfolio.
  • Short-selling. When purchasing stocks themselves, you can only profit when the market is rising. However, with CFDs, you can profit in both a falling and rising markets due to the ability to short-sell CFD products.

Why trade shares CFDs with edufintech.org?

Advanced AI technology at its core: A Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative News Feed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos and articles to help polish your investment strategy.

Trading on margin: Providing trading on margin (5:1 for major shares), Edufintech gives you access to the stock market with the help of CFDs.

Trading the difference: When trading CFDs on shares you don’t buy the underlying asset itself, meaning you are not tied to it. You only speculate on the rise or fall of its share price. CFD trading is no different from traditional trading in terms of its associated strategies. When trading CFDs you can go short or long, set stop and limit losses. So whether your outlook on a particular stock is positive or negative, you can trade this market in either direction.

All-round trading analysis: The browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Edufintech provides live market updates and various chart formats, available on desktop, iOS, and Android.

Focus on safety: Captal.com puts a special emphasis on safety. Licensed by both the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

CFD trading meaning: What is a contract for difference?

If you’re new to leveraged trading or just discovering the markets for the first time, you probably will have asked yourself either “what are CFDs?” or “what is CFD trading?” Instead of googling “CFD trading meaning” you can learn everything you need to know here.

A contract for difference (CFD) is a popular type of derivative that allows you to trade on margin, providing you with greater exposure to the financial markets. CFDs are a type of derivative, meaning you do not buy the underlying asset itself. Instead, you buy or sell units for a given financial instrument depending on whether you think the underlying price will rise or fall. A CFD is a contract between a broker and a trader who agree to exchange the difference in value of an underlying security between the beginning and the end of the contract.

CFDs and futures are both derivatives, so what is the difference?

A futures contract (or simply ‘futures’) and a contract for difference are both derivative products. When you purchase a CFD, you are buying a set number of contacts on a market if you are expecting that market to appreciate and selling a set number if you expect the market to fall. The change in the value of the position you take is reflected in the movements of the underlying market. With CFD trading, you can close your position at any time when the market is open.

Futures, on the other hand, are contracts that mean you are agreeing to buy a financial instrument at a set point in the future at a predetermined price. Unlike CFD trading, you have a set date and price for this transaction, which means closing your position could be costly. The value of a futures contract depends on both the current movements in the underlying market and the market sentiment about the future price of an asset.

Leveraged trading with CFDs explained

Leveraged trading

When you are trading CFDs, you hold a leveraged position, which means you gain greater exposure to the market with your initial capital. In other words, you only put down a deposit of the value of your trade and borrow the remainder from your broker.

Leveraged trading is also referred to as trading on margin. This is because the funds required to open and maintain a position – known as the margin – are only a faction of the total trade size.

There are two types of margin you should be familiar with when trading CFDs. There is the deposit margin, which is the amount required to open a position, and the maintenance margin, which may be required if your trade starts making losses that are not covered by the deposit margin or additional funds held in your account.

Long and short CFD trading explained

Long and short position
long and short position

CFD trading allows you to profit from both a rising or falling market. You can make money on an appreciating or depreciating asset because the contract offers both buy and sell options.

This means you can use CFDs to mimic investing in an asset by opening a long (buy) position; this is known as buying or ‘going long’. Conversely, you can open a short (sell) position if you think the price will decrease, which is essentially ‘betting’ against the market. This is also known as selling or ‘going short’.

Use CFD trading to hedge

hedging

Hedging in trading is a crucial risk management strategy. A hedge is an investment position that is opened in order to offset potential losses of another investment. Think of hedging as an insurance on an investment: if an investor is hedged in the event of a sudden price reversal, then the ramifications are dampened. Simply put, a hedge is a risk management technique used to reduce any substantial losses. You hedge to protect your profit, especially in times of uncertainty.

CFDs provide an excellent insurance opportunity to hedge your existing portfolio due to the fact that you can sell short by speculating on a price downtrend.

Say, for example, that you have an existing portfolio of blue chip shares. You want to them hold for the long term, but you feel as if the market is about to witness a short dip, and you are concerned about how this will affect the value of your portfolio. With leveraged trading, you can short-sell this market in order to hedge against this possibility. Then, if the market slides, what you lose on your portfolio can be offset by the gain from your short hedge using CFDs. If the market rises, then you will lose on your hedge but gain on your portfolio.

What can you trade with a CFD?

What can you trade with CFDs

When CFD trading, you can open positions on a variety of different asset classes including shares, indices, currencies, commodities and cryptocurrencies – all within one single platform.

A trader can enter the stock market without having to deal directly with share purchases, providing greater liquidity and easier execution. This has the added benefit of being able to profit in a falling market by short selling.

Trading CFDs is one of the very few ways to gain access to the indices market. CFDs on indices mirror the composition of a certain index. The FX market is suited to CFDs and leveraged trading due to the relatively small price movements that occur in these markets.

Remember to employ risk management techniques when trading at all times and be even more cautious of assets that have a history of being highly volatile like cryptocurrencies.

Advantages of CFDs trading

No stamp duty
CFDs are exempt from stamp duty as they are a derivative product. You would save the 0.5% stamp duty on the buy transaction costs.
Greater access to financial markets

CFDs provide access to various financial markets in which it might otherwise be difficult to gain exposure (e.g. overseas or emerging markets). CFDs also allow investors to trade on the price movements of stocks, commodities, indices, currencies and cryptocurrencies through one single platform here at Edufintech , saving both time and money.

Leveraged returns
Trading on margin allows you to increase your market exposure, and consequently, your investment capacity with a smaller initial deposit. It is crucial to remember that with higher potential returns, there is also increased risk.
Short selling
When trading CFDs, you have the ability to short sell a market. This is essentially ‘betting’ against the market, speculating on the depreciation of an asset. CFDs allow you to take both long or short positions with equal ease. Conversely, short selling of traditional shares often comes with added broker fees.
Lower barriers to entry
You can enter the CFD market by registering with Edufintech and making a deposit. CFDs do not call for upfront financial restrictions, unlike traditional share dealing.
Quick and Accessible trading
CFD trading allows investors to access the market directly without the need to call in a stockbroker. This is a quicker medium to trading and is an accessible way for those new to trading to enter the market.

Why trade CFDs with edufintech.org?

  • Advanced AI technology at its core: A Facebook-like News Feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative News Feed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos, articles, news to polish your investment strategy.
  • Trading on margin: Providing trading on margin (up to 200:1 leverage), Edufintech gives you access to financial markets with the help of CFDs.
  • Trading the difference: When trading CFDs, you don’t buy the underlying asset itself, meaning you are not tied to it. You only speculate on the rise or fall of the asset price. When CFD trading you employ the same strategies as you would in traditional markets, with the exception that you can short-sell with CFDs. A CFD investor can go short or long, set stop and limit losses and apply trading scenarios that align with their objectives.
  • All-round trading analysis:The browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Edufintech provides live market updates and various chart formats, available on desktop, iOS, and Android.
  • Focus on safety: Edufintech  puts a special emphasis on safety. Licensed by the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

What is spread betting?

Spread betting is a tax-free derivative product, which enables traders and investors to benefit from price fluctuations of underlying financial assets, including stocks, commodities, indices, currency pairs and cryptocurrencies.

A flexible form of trading, spread betting allows traders to speculate on bullish and bearish price movements, taking long and short positions accordingly. It provides traders with double the amount of  trading opportunities than the more  traditional form of buy-and-hold trading.

Spread betting explained simply: key features

  • Flexibility: long and short positions available
  • Spread betting leverage
  • Spread betting margin

What does it mean to go short or long in spread betting?

In spread betting you can profit from both ascending and descending price swings of the underlying assets, making long and short trades accordingly. If you feel the price of the underlying asset is going to rise – you “go long” and open a position to BUY. If you feel the price of the underlying asset is going to move down –  you “go short”, opening a position to SELL.

The amount of profit or loss of your trade depends on the extent to which your forecast was accurate and the size of your opening position. For example, if you open a short position and the underlying market does decline, your spread bet will profit. Otherwise, if the market goes against you, you will lose. If you open a long position and the market rises, moving in your favour, you will profit. If the market declines, your trade will lose.

Spread betting explained simply

Learn spread betting: leverage

Leverage is one of the main features that makes spread betting so popular among traders. It provides the possibility to open a much bigger trade with just a fraction of the underlying asset’s value. In contrast with traditional share trading, where you have to pay the full value of your investment upfront, spread betting enables you to deposit only a portion of that overall value and the rest is provided as leverage by your broker.

Leveraged trading can significantly increase your profits and losses, as they are calculated based on the total value of the trade, not the initial sum of your deposit. Of course, if profits are magnified using leverage then it is important to understand that losses are also magnified. This is why it is important to develop an effective risk management strategy to minimise losses when markets do not move as you expected.

Learn spread betting: margin

When making a spread bet, you tie up an initial amount – the initial margin requirement – which accounts for a certain percentage of the total trade’s value. That is why spread betting is often referred to as “trading on margin”.

In spread betting there are two margin types to remember: the initial (deposit) margin and the maintenance margin. The initial margin is the deposit you make when opening the trade. It will be enough to start trading and hold an amount in reserve to deal with losses and price swings.

Maintenance margin may be required if the trade is going against you. It is meant to be enough to cover potential additional losses not covered by the initial margin. If you do not have enough money in your account to cover any running losses you will receive a notification from your broker – a margin call.

What is spread betting?

How does spread betting work?

When making your bet, you open a position based on the assumption of the asset’s price future movement: whether it will rise or fall. You do not buy or sell the asset, like a commodity or a share itself, instead you make a bet on how the market will move. When trading this way you buy or sell a specified amount per point of the asset’s movement, which is known as the stake.

What is spread betting?

To better understand how spread betting works, let’s take a close look at three major components: the spread, the bet size and the bet duration.

Spread

The spread is the cost you pay to open a trade. It is the difference between the sell and buy prices. All markets usually have bid (sell) and ask (buy) prices, meaning that you will buy a bit higher than the middle price of the underlying asset and sell slightly lower than the middle price of the asset.

For example, the FTSE 100 index is trading at 5657.5 with a 1 point spread.  It would make the ask price equal to 5658 and the bid price equal to 5657.

What is spread betting?

The bet size

The size of your bet is the amount of money you want to bet per point of the underlying market’s price movement. You define the size of your bet at your own discretion, subject to the certain minimum we accept for a particular market.

You can calculate your profit or loss by taking the difference between the opening and the closing price of your trade, multiplied by your bet size. The asset’s price movement is calculated in points. One point of movement may represent for example a one pence when it comes to UK shares or a one point move on an index such as the Dow Jones or FTSE 100.

For example, if you open a bet for £5 per point on the FTSE 100 index and it goes 50 points in your favour, your profit will comprise £5 x 50 = £250.

The bet duration

In contrast to contracts for difference, all spread bets have a predefined expiry, ranging from one day to a couple of months. Still, you can close your bet at any point, before the expiry date.

You can run the daily spread bets as long as you want. Usually they have tightest available spreads. For each day your bet remains open, your account balance will be adjusted to reflect the funding cost incurred due to trading on leverage. Daily bets are usually used to trade on shorter-term market movements.

Quarterly bets expire at the end of the specified quarter period. The funding costs for these bets are in-built into the spread. Quarterly bets can also be rolled-over to a new quarter if you require and want to continue to run the position.

Spread betting example: Tesla

Let’s assume that Tesla (TSLA) shares are traded at a sell price of 57014 ($570.14) and a buy price of 57072 ($570.72). You expect the TSLA price to go up in the next couple of days. You take up a long position (buy) Tesla shares for £20 per point of movement at 57072.

If your prediction is right and the Tesla stock goes up, you may decide to close your trade when the price reaches 57122. In this case the market gains 50 points (57122 – 57072) and you will get a tax-free profit of £1000 (50 x £20) .

how spread betting works

Still, trading is risky and the market can move against you. If the TSLA price goes down to a sell price of 57052, you will bear a loss. The share price fell by 20 points (57072 – 57052), meaning your trade will end up with a loss of £400 (20 x £20).

how spread betting works

To learn more on how to spread bet, follow our ultimate spread betting guide.

*Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

Leverage and Margin

UNITED STATES (EDUFINTECH) – Traders have the option of using leverage and margin when trading CFDs at Edufintech . The two terms are in fact intertwined, as you use your margin to create your leverage. While leverage can increase the potential return on your investments, it can also increase potential losses, so it’s imperative that you think carefully about the amount of leverage you want to use. Using leverage, both successful and unsuccessful deals are, in simple terms, amplified.

Leverage

Leverage is the ratio between the amount of money you actually have to the amount of money you can trade and is usually expressed as a X:1 format. Leverage makes it possible to command much larger positions with a small amount of capital in comparison.

For example, if the leverage of your account is 30:1, this means you can trade up to 30 times the equivalent amount of base currency you have in your account. This theory is correct no matter what leverage you are using.

Margin

When you use leverage to trade on CFDs, you have to maintain a certain level of funds in your account (the necessary margin), also known as a good faith deposit. By calculating and understanding your margin requirements beforehand, you are able to apply good risk management and avoid any unnecessary margin calls resulting in the closing of a position due to a lack of margin in your account.

Margin Call

Although margin trading can help magnify potential returns on positions, leveraged trading also has increased risks. A margin call is used by brokers to inform traders that their account has depreciated to a specific value (value depends on the broker). Leveraged trades that move in the opposite direction from your prediction can rapidly drain your available capital.

Trades with leverage that move in the wrong direction can multiply quickly and drain your available trading capital much more rapidly.

Fundamental Analysis

UNITED STATES (EDUFINTECH) – Fundamental analysis finds the intrinsic value of an asset, by studying different factors and events that can have an influence on its price, using tools like economic calendars and by analysing economic data. The data analysed can range from company data to major global events like wars. Many of the factors are interconnected and can affect different asset classes as well as different assets.

There are a number of various tools and techniques that can be used when performing fundamental analysis and have been categorized into 2 types, a Top-down analysis which takes a broader view of the starting with the entire market before it narrows down. While a bottom-up analysis starts with a specific asset and widens out considering all of its factors that impact its price. It is important to follow general worldwide and financial headlines, so that the information is put into a larger context.

Some factors considered in fundamental analysis:
  • Economic data – the release of economic data like; unemployment rates, and interest rates, can play a big role in price fluctuation.
  • Weather and natural events – these factors can have a major impacts on the supply and demand of specific assets.
  • Politics – many political events can have a significant impact on the price of certain assets.

Fundamental analysis helps traders gather the correct information, needed to make a rational decision and to understand the value of the asset, anticipate and predict future price trends in order to take a longer view of the market. While using fundamental analysis, it is important to keep in mind that factors causing a shift in the fundamentals of these assets can vary between asset classes.

For example, if you are using fundamental analysis to look at a stock, the trader should consider factors like mergers and acquisitions, company news, earning reports etc.

Currencies can be most affected by changes to interest rates, geopolitical events and world economies.

Some of the factors that has the biggest effect on agricultural commodities is natural events and major weather events, like extreme heat or cold, parasites or floods.

Technical Analysis

UNITED STATES (EDUFINTECH) – Technical analysis is the study of the behaviour of the market, using indicators, graphs and reports in order to best speculate on future trends of an asset price. The three basic assumptions in technical analysis are that: prices move in trends, history repeats itself and the price of an asset reflects its stability.

  • Asset prices move in trends: this is the understanding that prices always move in certain trends depending on the circumstances that occur every moment in the market. Using technical analysis, you can define the trends and find the assets you wish to trade.
  • History repeats itself: this is the belief that specific market trends reoccur repetitively. By examining and comparing the past behaviour of an asset, it can help you decide what to do with that asset depending on its historical movements.
  • The price reflecting the overall stability of the asset: Many elements can affect the market and reflect in share prices. Supply and demand have a major affect causing asset prices to rise or fall. Using technical analysis, you examine the consequences, and not the factors which caused the change in price.

Traders who choose to employ technical analysis, believe that price fluctuations are never random, and the reason can be identified using the proper strategy. Traders can also use technical indicators in their trading methodology, including popular indicators like the RSI (relative strength index), Moving average, and Fibonacci retracements.

Using technical analysis, traders use the market trends to predict the movements of specific assets in the future by finding patterns in the price changes and therefore helping to speculate on the future. Technical analysis gives traders an indication of the downward or upward trend in the price of an asset and allows them build a strategy. It’s also important to note that technical analysis is performed the same no matter what underlying asset you are looking at.