What Are The Basics Of Contract For Difference (CFD) Trading?

CFD refers to a financial contract between brokers and traders to pay the asset price differences between opening and closing trade.

• Question 01

  What does CFD stand for?

  Your Answer

  • A.Centralized Financial Document

  • B.Contract For Differences

  • C.Currency Futures Declaration

  • D.Commodity Fund Dynamics

• Question 01

  What is the primary purpose of a Contract for Difference (CFD)?

  Your Answer

  • A.Asset ownership

  • B.Speculating on price fluctuations without owning the asset

  • C.Legal documentation for traders

  • D.Real estate investment

• Question 01

  How is "going short" or "taking a short position" defined in trading?

  Your Answer

  • A.Buying an asset

  • B.Selling an asset with the expectation of a price increase

  • C.Selling an asset with the expectation of a price decrease

  • D.Holding an asset indefinitely

• Question 01

  How does leveraging enable traders and investors to potentially increase profits?

  Your Answer

  • A.By reducing the size of their trades

  • B.By avoiding the use of borrowed capital

  • C.By amplifying the size of their trades

  • D.By limiting the number of trades made

• Question 01

  What is the definition of margin in trading?

  Your Answer

  • A.The total value of assets traded

  • B.The amount of profit earned by a trader

  • C.The small capital required for trading larger amounts of assets

  • D.The difference between the buying and selling prices

• Question 01

  Why is having a good risk management strategy important for CFD traders engaging in leveraged trading?

  Your Answer

  • A.To increase potential returns

  • B.To minimize the impact of asset price changes

  • C.To eliminate all risks in trading

  • D.To avoid using leverage entirely

• Question 01

  What is hedging in the context of trading and investment?

  Your Answer

  • A.A strategy to maximize profits

  • B.A risk management strategy to reduce financial loss

  • C.An approach to increase market volatility

  • D.A method to eliminate all trading risks

• Question 01

  How does hedging work in trading?

  Your Answer

  • A.By increasing the risk exposure on a single asset

  • B.By avoiding all forms of financial instruments

  • C.By taking offsetting positions in financial instruments

  • D.By relying solely on the positive direction of asset prices