In this edition of the CFD classroom, we give an overview of the basic types of CFD trades - to be expanded on in the following editions of the series.

In this edition, we will talk about the basic ways that you can trade CFDs. The method you chose depends on a number of factors including:

• which stock you are trading and whether your CFD provider is the market maker for the CFD of this stock
• whether you want to enter the market right now, or wait until the market price reaches a certain level
• whether you want to make sure your full order is filled or it is more important to be filled at a specific price
• whether you are participating by trading directly on the market prices in the Exchange order book

We will be expanding on some of the basic trades in the coming editions.

Direct Trading on Live Tradable Prices (Green Prices)

Trading CFDs on a displayed live tradable price offers very fast direct execution of CFD trades: When a CFD price hits a price you are interested in, you hit the Buy or Sell button and the full amount of your order is guaranteed at the price displayed. Trading on live prices is only possible if your CFD provider is the Market Maker for the CFD.

For the CFDs where we are the Market Maker, the price is displayed in green and you can buy or sell the amount of CFDs at the displayed price:

We will describe trading Market Maker CFDs more fully in the next edition of this classroom series.

Trade Orders

The other way to trade CFDs is by trade orders. Trading by order can be almost as fast and direct as trading on live prices, and by participating directly in the exchange order book, orders can be filled within seconds.

Use of Orders

Trading on live tradable prices is typically used for entering and exiting the market fast when you feel the conditions are right. Trade orders allow you to make a more strategic approach to trading and to plan your moves up front. Taking a more disciplined approach to taking a position, you would typically use:

• An entry order to trade when (if) the market reaches a specific price.
• A take profit order to close the position when the market price reaches a level you expect it to reach.
• A stop loss position to the position in case the market moves in the wrong direction. Note:This is always highly recommended, serious traders should always protect their positions and limit their losses in case of adverse market moves.

There are three basic order types to help you do this:

• Market Orders to trade as soon as possible at the best price currently obtainable in the market. This is typically used when tradable green prices are not available.
• Limit Orders to trade when the price hits or breaches a level below (for buy orders) or above (for sell orders) the current market price
• Stop Orders to trade when the price hits or breaches a level above (for buy orders) or below (for sell orders) the current market price.

We will go into much more detail about the effective use of orders in the next edition of this series.