Different types of CFDs are classified on the basis of the underlying financial instrument they relate to. For example, share CFDs have shares as the underlying reference instrument. Similarly, commodity CFDs are related to commodities, Forex CFDs to currency exchange rates and Treasury CFDs to government securities. CFDs may also refer to futures contracts and exchange traded indices.
Basically, there are three basic types of orders in CFDs.
– A market order is order for creating positions in CFDs at the best available market price. Some CFD providers allow you to place market orders even when the markets are closed so that you get in as soon as the market opens.
– A stop loss order is for restricting the amount of potential loss that you are ready to take. A stop loss order for buying a CFD means that you will buy if and when it trades at or above a specified price. A stop loss order for selling a CFD means you will sell if and when it trades at or below the specified price.
– A limit order is an order that you use to open or close existing positions in CFDs at a price that is more favourable to you than the current market price.
Providers of CFDs tend to make different combinations and permutations of these basic order types to allow traders to select the one that suits them the most under the circumstances. These order types include but not limited to orders to accept a price within a specified range, contingent orders to control potential profits or loss on open positions in CFDs and one-cancels-the-other-order. This is of particular importance for traders who cannot, due to whatever reasons, afford to be in front of their computers to trade in CFDs all through the open hours of markets.
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