What is CFD all about? CFD stands for contract for difference, where the contract refers to an agreement made between a CFD company or a broker and its respective client, the trader. This agreement is done in order to exchange the difference between the price of the share that is present in the opening and the price of the share that is present at the closing of the trade. This CFD trading is one of the most commonly used financial tool which is quite popular among investors as it allows them to get the rights to sell or buy certain contracted amount of shares at a particular price for a specific period of time. There are many ways in which an individual can use CFD trading to increase his/her profits and curtail the losses. To find out more, continue reading..CFD strategies that are used

If you decide to the long way, it involves purchasing the right to buy the stock at its current price at some time in the future. An investor can buy a long CFD if he believes that the stock will grow in value so that he/she can exercise the CFD after the stock prices increase. The CFD brokerage company pays the difference that is present between the new stock price and old stock price to the investor. This is quite similar to buying, holding and selling shares. But the CFD trader does not really own any shares nor pay any stamp duty. In fact they buy on a margin that will enable them to trade more shares with less amount of cash. The other method is just the opposite where you buy a short CFD and enter into a particular contract that pressurizes the CFD broker (http://www.cfdspy.com/brokers.php) to pay the difference to you in case the shares fall down.

Another method that is commonly used and which is comparatively easy to understand is pair trading with CFDs. This strategy is relatively used in the complete leveraged world which is common and is called spread trading where a particular product is bought and another product is sold at the time. Here the pairs trader simply trades the price differential of the two sold products. One clear example of spread trading is buying of Gold and selling of short silver, purchasing corn and selling wheat. One specific area where CFD traders get involved with Pairs trading is when a stock is bought and the underlying index is sold short. Hence there are many strategies that are used by CFD traders such as pairs trading, portfolio hedging and arbitration plays. Instead of getting confused what strategies should be used, go for the ones that have been discussed above.

Resources:

http://www.independentinvestor.com/cfd/strategies

http://www.cfdspy.com/guide/trading-strategies.php