A CFD or Contract for Difference is a simple agreement to exchange the difference in value of a specific financial investment instrument which is reflected in its opening and closing values. It is a popular trading method because of the higher levels of flexibility it offers as compared to the normal methods of trading in shares. The unique thing about this option is that you can profit even from a falling market. There are innumerable possibilities and opportunities available with CFDs.

With CFD trading it is possible to go long or short on shares, forex and other financial instruments. You always trade at the market bid offer price when you trade CFDs. The concept is relatively simple and easy to understand even to a novice who has never traded in shares or forex. If you feel that a market is set to rise, you buy at the top end of the quote. On the other hand, if you sense a falling market, you sell at the bottom end of the bid price.

The position that you hold at any given point in time is contractual in nature which means that you never really own the financial instrument you are buying. When you trade CFDs you want the prices to rocket up when you buy and to want them to drop down when you are looking to sell your position.

Traditional financial assets are not leveraged whereas CFDs are and that is the principle difference. There is a high level of flexibility to back your judgment across many financial markets. Risk management is an important necessity when you trace CFDs because you are exposed to the possibility of substantial losses. Through knowledge about managing your portfolio is necessary to mitigate the risk elements associated with CFDs.

Understanding the volatility of the various markets and judging the sharp price movements accurately is the key to get an upper hand in dealing with CFDs. Financial portals that manage forex and CFD trading have advanced trading tools and software to make accurate predictions most of the times.

One of the highly recommended strategies is to closely monitor your open positions. A good eye for predicting market movements and can help in pre-empting situations of extreme fluctuations. Signing up with a well established trading portal can give you access to sophisticated tools for making the right judgment almost every time.
However, it is absolutely imperative to actively monitor your account at all times.