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Long or short - How to profit from the rise and the fall!

by , 15 June 2016
Long or short -  How to profit from the rise and the fall!
The JSE's performance over the last seven days has been dismal to say the least. It's down 3.22% and nobody seems to know when it's going to stop.

Every major sector on the JSE has decreased taking the shares down with it.

Financials - Down 1.53%
Resources - Decreased 1.79%
Industrials - Fell 1.12%
Gold mining - Tanked 4.12%

But despite this poor performance, there are opportunities for you to profit under any market conditions.


Contracts for Difference, your opportunity to profit in an up or down market

 
Contracts for Difference (CFDs) are a financial derivative that you can use to trade underlying assets such as shares and currencies.

But what are CFDs, when do you trade them? How do they work? Most importantly...
 
How do you make money from them?

Well, Let's take a closer look…

The difference going long or going short CFDs makes


When you trade CFDs, you can go long (buy) or go short (sell). This means you can potentially profit from the rise or fall of the underlying asset.

Depending on whether you go long or short impacts the outcome of your trade in a number of ways…


What happens when you go long CFDs?


To show how this works, let’s use an example. Say you decide to go long Company ABC CFDs.

If the share price of Company XYZ rises, you’ll receive the difference from the daily closing price. In other words, you’ll make a profit.

But if the share price of Company ABC falls, you’ll pay the difference from the daily closing price – you’ll make a loss.

If Company ABC pays out a dividend while you’re in the trade, you’ll receive the cash equivalent of the dividend.

When you’re in a long position, you pay daily funding if you hold a trade open overnight. You’ll pay this each time you hold the position open overnight.


What happens when you go short CFDs?


If the share price of Company XYZ falls, you’ll receive the difference from the daily closing price and make a profit.

But if the share price of Company XYZ falls, you’ll pay the difference from the daily closing price – You’ll make a loss.

If Company XYZ pays out a dividend while you’re in the trade, you have to pay back the equivalent of the cash dividend.

When you’re in a short position, you receive daily funding if you hold a trade open overnight. You’ll receive this each time you hold the position open overnight.

So there you have it. How trading CFDs works whether you’re going long or going short.
 



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