Opening a CFD trade might seem as simple as clicking a button, but there’s more going on behind the scenes. Understanding each step helps traders make more informed choices and manage risk more effectively. Whether you’re using a demo or real account, knowing what actually happens when you enter a trade is key to building good habits.
When you decide to open a CFD trade, the first step is choosing the asset you want to trade. This could be anything from a stock or index to a currency pair or commodity. Once you’ve made your choice, you then decide whether you believe the price will rise or fall. If you expect it to go up, you open a “buy” position. If you think it will drop, you open a “sell” position.
In online CFD trading, you don’t own the asset itself. Instead, you’re agreeing to trade on the price difference from when you enter the position to when you close it. That’s why it’s called a Contract for Difference. Your profit or loss is based on how much the price moves in your chosen direction—without needing to hold the actual share or commodity.
Before placing the trade, you also set the amount you want to trade, which is often referred to as your position size. This is where leverage comes in. Most online CFD trading platforms allow you to trade with more money than you deposit by using margin. For example, with 10:1 leverage, a £100 deposit could control a £1,000 position. While this boosts your buying power, it also increases risk, so it’s important to use it wisely.
Once the trade is open, it will show up in your account under “open positions.” You can monitor its performance in real time. The value will rise or fall depending on the live market price. Your trading platform will usually show your entry price, the current market price, your profit or loss, and the amount of margin used for that trade.
Many traders choose to set a stop-loss and take-profit level at the same time they open a trade. These are automatic instructions that close your trade if it hits a certain loss or profit level. It’s one of the best ways to control risk in online CFD trading, especially during fast market moves or when you can’t watch your screen closely.
Behind the scenes, the broker keeps track of your margin level. If your trade moves against you and your account value drops below a certain point, you might receive a margin call. This is a warning that your balance is too low to support the trade. If no action is taken, the platform may close the trade automatically to prevent further losses.
You can close the trade manually at any time. Once it’s closed, the difference between your entry and exit prices is calculated, and the result—profit or loss—is applied to your account balance. This closes the contract, and the funds are updated instantly on your trading dashboard. Knowing when to close a trade is just as important as knowing when to open one, especially in fast-moving markets.
Every CFD trade is a short-term agreement, not a long-term investment. The goal is to make gains from price movements, whether up or down. That’s why timing, planning, and position sizing are all so important.
By knowing what happens at each step of the process, traders are better prepared to avoid surprises. Online CFD trading gives quick access to many markets, but success depends on more than just pressing the right button. It’s about understanding how each trade works, so every move fits your strategy.
