Many people think there is no difference between Forex and CFD as they may seem pretty similar at first sight. No wonder some are looking for a CFD Forex united market. Find out how different they are before you enter any financial market. In the meantime, keep in mind that both Forex and CFD are equally good in different features.
Sums and Risks
As a CFD trader, you have to check out the risk profile and decide upon the capital you want to use. Many traders start with $500. However, this number varies depending on your goals. This amount is widely used by Forex traders, while CFD fans prefer to work with larger sums.
Both markets are not secured from losses and are still risky. You have to learn every market space carefully before you decide on the preferential one for you. Otherwise, you might lose money on each of them.
These features make many newcomers believe that these markets are united. There are several common characteristics:
- Similar execution trading process. Traders enter and leave the market whenever they want. No matter whether these markets are falling or rising, it is your choice;
- Both markets have the same platform. They use similar charts and methods of pricing. All the deals are performed in the OTC or over-the-counter market. Every trade is performed online;
- The spread cost is common for both of them. Unlike other trading tools, there is no commission or fees;
- Neither Forex nor CFD traders own the underlying asset. They don’t belong to traders who simply earn money from exchange rate or rise and fall of prices.
The differences might be less noticeable at first glance. After learning them, it will be easier to decide which market to enter.
- Different contracts’ types. Forex and CFD have different contracts for a wide range of markets. CFD is unlimited by the variety of options, including energy, indices, and even metals. Forex is currency-oriented only. When you trade CFD, you can choose contracts from a wide range of markets, unlimited by the value and type of currency. Meanwhile, Forex offers you to trade one currency against the other;
- Factors that influence markets related to Forex and CFDs. CFD markets are influenced usually by specific factors like commodities’ major demand around the world or in a specific country. With the change of trend, the assets can lose or gain even more. Forex is driven by global events, including presidential elections and changes in the political world. To become successful at Forex, you have to predict the possible outcome of global events.
The Best Market: Does It Exist?
You already know that there is no best market. The one you choose is probably the one you need. Both Forex and CFD have their benefits and can be equally risky for traders without enough knowledge and experience.
If you still don’t know which one to choose, check them both out and decide on the market you like the most. Try Forex if you are familiar with currency exchange and keep an eye on the political situation in the world. Opt for CFD in case you prefer commodities and can predict the change of the asset’s price during the day. Share your opinion in the comments if you already use them. Which one do you like the best?