Most people think that you need a lot of money to make a decent profit trading on the stock market. In this article we would like to show you that you can make a significant profit with small amounts (e.g., 100 pounds) by trading CFDs or Contract for Differences.
Trade CFDs with small amounts
I can understand that you’re curious about trading. You can make a lot of money with only a little bit of money trading CFDs. But what are CFDs? With CFD trading you trade in the underlying value of a stock or a Forex pair. The most important aspect of trading CFDs is the presence of so-called leverage. Leverage makes it possible to make a big transaction with only a small amount of money and without the risk of losing more than your initial stake. But how does this work?
Example of trading
Let’s look at an example. If you deposit 100 pounds into a broker account of a broker like Plus500, you can use a leverage of 10:1. Then let’s say you are watching the news and you see that Philips has had a tremendous success with amazing numbers. Because of this news report you anticipate a price increase and you want to trade, but you only have 100 pounds in your account.
If the price of a random stock is 20 pounds, normally you could only buy 5 of those stocks. Thanks to a leverage of 20:1, however, you can now buy 2000 pounds worth of stocks, which means 100 stocks. When the price goes up from 20 to 22 pounds in a period of two days, you make 100 times 2 pounds, meaning you make 200 pounds: a profit of 200 percent! With just a small amount of money that is still possible.
It is important to note that with leverage both profits and losses can accumulate quickly. When the price drops by 10 cents, you lose 100 times 10 cents. The good news is you can never lose more money than you have deposited in your account.
Why CFDs are attractive
Besides leverage there are other advantages to trading CFDs. One major advantage is that you can short sell stocks. When you short sell a stock, you make money when the price goes down, which implies that you can still make money during bad economic times. In fact, with leverage and shorting you can make money in any type of economic climate. CFDs are more dynamic and thus more profitable!
Practice trading for free with a demo
Do you want to trade CFDs with a small amount of money? You can! At most of the brokers you can simply open a demo account where you use virtual money under real market conditions to practice. At some brokers it’s even possible to start trading with real money for free, which means you can start trading without depositing any money!