Updated: June 28, 2023
Reading loads of words in your own language that you have never read before can truly be overwhelming. In this article you will find the basic terminology for online CFD trading.
You well know that Contracts for Differences (CFD) is a thriving market nowadays, but if you are not a trading connoisseur yet, you may end up quite puzzled each time you visit a website about online CFD trading.
So here you have a little starter’s dictionary to make yourself more acquainted with CFD trading.
If you are already familiar with the trading world, you will see that some terminology rings a bell.
Learning the Lingo
Bid Price
That’s what you will get for your CFDs.
Ask Price
This is what you have to pay for your CFDs. Both Ask and Bid appear quoted together as in 1.2634/1.2636.
Bonds
It refers to the market where they buy and sell debt securities.
Commodities
A market based on primary products, or raw products, like oil, gold, etc.
Margin
A certain amount of equity balance that you have to deposit in your online CFD trading account. The rest of the money needed is lent to you by the broker.
Margin Call
This is bad news. You have to top up your account with more margin. You are given a certain amount of time to perform the transaction.
Go long
Also known as buy long, it refers to the action of buying with the assumption that the price of the underlying asset (remember we are talking about CFD not mere stocks) will go up.
Go short
Also known as sell short. If you think the price of an asset will plummet, you can ask your broker to lend you a specific product; you don’t own it yet. Eventually you will buy that product, but if the price performed as you expected you will pay a lower price than you would have payed when you made the deal.
To be called away
This happens when your broker forces you to buy when you go short. Since he lent you it, he can claim it back at any time.
Stop Loss
This is the point where you automatically close your trade. If you go long, you would set the stop loss point below the value of the quote.
Although this is not at all a comprehensive glossary, it should get you started and help your eyebrows relax by taking away the stressful feeling of being puzzled.
What Is the Next Step?
Well, now that you are familiar with the lingo, why don’t you try to trade a little? Just google “online CFD trading” and you will find quite a few websites.
Most of them offer, and I encourage you to first start on a trial account, where you can trade but not with real money. That should give you the opportunity to see whether you get along well with CFD trading or not.
Based on that, you could then set up a real account and multiply your money. Remember that CFD trading is a high risk activity, so don’t invest money that you can’t afford to lose.
This article is submitted by Daniel Quinn
What to do next: Click here to subscribe to our FREE newsletter.
