Trading Contract for Difference is quite similar to share trading. The rules are the same. What is different is that in CFDs you do not own the underlying asset. You buy a contract between you and your broker. You can trade stocks with CFDs on the IQ Option platform.
The first difference I have already mentioned. It is about ownership of the underlying asset. In CFDs, you buy a contract for difference, not actual company shares. The agreement made with the broker refers to the difference in the opening and closing prices.
With CFDs, you have the possibility to buy or sell. But all the transactions concern the contract. Even when you are selling, you are not obliged to provide the underlying asset.
Another major difference is that CFDs give a unique possibility to use high leverage. They are traded on margin, which means you only invest a margin of the value of a position. This permits to invest more than a trader has on hand. But the effect works on both sides. You can profit much more than you have invested, but you can also lose more. That is why you need to gain the necessary knowledge before you start trading CFDs.
In the UK, CFDs are relieved of the 0.5% stamp duty. The gains, however, remain under capital gains tax.
Trading CFD stocks on IQ Option
To trade CFD stocks you will have to follow a few steps. First, log in to your IQ Option account. Click on the plus icon and choose Stocks from the available options. You can see that the IQ Option platform offers 198 stocks from popular stock exchanges.
Then, you can search for a preferable asset simply by writing its name in the search window.
A whole list will be displayed. Next to the asset‘s name, there is some information about it like spread, change percentage and the maximum leverage you can use.
You have decided on the asset you are going to trade. Now there are a few more steps to follow.
- Set the investment amount for this particular transaction. This decision should be made according to your capital management strategy.
- Adjust the multiplier. Bear in mind, it will not only maximise the reward, but also a loss. In an example below a chosen multiplier is 5. The investment amount was $100 which means that the results will be multiplied. It is as if you were trading with $500 on hand. But the amount increased for both, profit and loss and that is why the next point is very useful.
- Auto Close. Setting auto close is optional. It is a very helpful tool as it will protect your account balance. Its function is to close the transaction automatically whenever it will reach a preset level.
- The last step is to decide on the market direction. Make a profound analysis and choose the Buy or Sell button.
You can close your position when you are satisfied with the result or when you see the situation is not developing as you predicted. Then, to secure your CFD earnings, you can choose to close the deal. Click on the Total Portfolio icon on the left side of the IQ Option platform. There you will see information about your position and the Close button.
Be aware there are overnight fees. Do not hold the position too long if you wish to avoid paying them.
Trading CFDs on the IQ Option platform requires a certain portion of knowledge and practice. You have done the first step. You are here. Now, make use of the free demo account offered by IQ Option and implement what you have just learned. You will not risk your own capital, as you make transactions with virtual cash. Use technical analysis tools for better market identification. Once you get hold of trading CFDs, you may switch to the live account and start earning real money.
I encourage you to tell us about your experience with the CFDs on the IQ Option platform in the comments section below. I will be happy to hear from you.
Best of luck!
We are sorry that this post was not useful for you!
Let us improve this post!
Tell us how we can improve this post?
Download this article as PDF. (English)Enter your Email Address