Trading has quickly become one of the best ways to grow your wealth and build a nest egg. Whether you are a veteran or a novice, you can make substantial profits by trading in the right assets and making the right investments. CFDs are a unique way of trading across all the different markets without having to actually own any assets. If you are curious about CFDs and want to learn how to trade this instrument in Dubai, we have you covered.
What are CFDs?
CFDs refer to Contract for Difference, a financial instrument that enables traders to speculate on the prices of assets. However, a CFD is only limited to helping traders speculate on price fluctuations without owning the asset in question. Instead of buying or selling an asset, a CFD helps a trader enter into an agreement with a broker to exchange the difference in the asset’s price from the time when the contract is begun to when it is closed. CFDs can be used to trade a range of assets including stocks, indices, forex, and commodities.
As far as how it works, a CFD mirrors the price movements of the asset attached. Traders can then profit from the price changes without ownership. CFDs are also leveraged and allow traders to control a larger position even when they have limited capital. While this kind of leverage increases the odds of a trader earning a profit, it also similarly amplifies risks associated with the asset. When a trader wants to enter into a CFD, they usually have to put up a margin i.e.: a percentage of the total trade value as collateral.
How to Begin CFD Trading in the UAE?
If you want to trade CFDs in the UAE, specifically Dubai, you need to choose the right broker, open a trading account, and then proceed with placing orders. Here is a breakdown of each step in greater detail to help you get started:
Step 1: Choose a Reputable Broker
When it comes to choosing the right broker, it is important you pay attention and pick firms that are regulated by the concerned authorities. In Dubai, most credible brokers are regulated by the Dubai Financial Services Authority (DFSA) or another similar organisation. Once you find a broker approved by the authorities, it is important to consider other factors like what kind of trading platforms they offer, the charges they levy, and which markets they cover. Ideally, it is best to choose a broker that offers an easy-to-navigate CFD trading platform with a clean interface. Make sure to keep an eye out for hidden costs and charges to avoid burning a hole in your pocket. Also, enquire about the broker’s customer service so you can seek assistance if and when you need it.
Step 2: Open a CFD Trading Account
As soon as you finalise the Dubai CFD broker you want to go with, you can open an account. Every broker has distinct processes and procedures; follow the same and complete filling out an application form. If needed, provide any necessary documents and financial statements. You might have to verify your identity via eKYC. Once you are verified and your account is functional, you can deposit funds using different modes like bank transfers, credit/debit cards, or e-wallets.
Step 3: Explore the Platform
Usually, brokers allow you to make use of a demo account to practice trading. You can explore the markets with virtual money and understand how the platform works. Doing so helps you avoid any errors and confusion while executing an actual trade. You can also use the resources available on the broker’s website or elsewhere to familiarise yourself with the charting tools. Make sure to follow tutorials on how to place orders and manage your trades, so you are prepared ahead of time.
Step 4: Develop a Strategy
Now that you are ready to begin trading, take a step back and determine a strategy. Before entering into a CFD, define your investment goals and gauge your risk tolerance. It is best to have a clear idea about what you want to achieve and how much risk you can bear before you start. Next, you can choose the markets you want to trade in: forex, indices, commodities, etc. Once you know which market you will be most comfortable in, practice and develop your analytic skills to improve your trades. Lastly, create a detailed trading plan, including when is the best time for you to enter and exit, which positions you would like to hold, and how you can manage risks.
Step 5: Execute Trades
Finally, you are ready to begin trading. Use your strategy and analysis to place buying and selling orders. In the case of CFDs, remember you are not actually buying or selling an asset; you are simply entering into and exiting a contract. Monitor your position and adjust your strategy if needed. Remember to stick to your plan and use your risk management techniques to avoid losses and exit at the right time.
If you want to explore investing in CFDs, Orient Finance is one of the most reputable brokers in Dubai. We allow you to seamlessly open an account and trade across markets like stocks, forex, commodities, and indices. We also offer resources, including strategies related to CFDs, that help you upskill and improve your trades. With lightning-fast speeds and steady customer support, we help you give your best shot when you make a trade.
