All about trading with CFDs on the Binomo platform

Trading with CFDs is becoming more popular not only among expert traders but also among novices. This article will guide you through the step-by-step process of how to trade CFD in Binomo, teach you how to calculate potential income and losses, and answer frequently asked questions from Binomo traders.

What is CFD?

CFD stands for Contract For Difference. It is a trading mechanic that allows getting additional income on the difference between the buy and the sell prices of an asset. The CFD value does not consider an asset’s underlying value: only the price change between entering and exiting a trade.

The purpose of the trading mechanics on Binomo is to forecast whether the asset price will go UP or DOWN and, if it is correct, earn extra income. Its size is determined by the difference between the opening and the closing price of an asset.

How to trade CFD in Binomo?

CFD mechanics are understandable even for those who have not traded before. Just follow these simple steps:

1. Go to the website www.binomo.com, and register with your email address or Google/Facebook account.
2. Log into your demo account. Note that CFD trading is not possible on a real Binomo account.
   
3. Click the “+” in the left corner, and select the desired asset in the “CFD” section.
   
4. Specify the trade amount (from $1 to $1000).
5. Set the multiplier (available options are 1, 2, 3, 4, 5, and 10).
6. Forecast the asset price movement by clicking the up or down arrow.
7. Click the “Trade” button.
   
8. Follow your trade in the “Trades” section.
9. Close the trade at the desired time by clicking “Close”.

Note! If you do not close the trade manually, it will automatically close 15 days after opening.

How to calculate profit and loss?

Income and loss on CFD trade at Binomo are calculated using the following formula:

Investment x multiplier x [(closing price / opening price) – 1]

The profitability of CFD trades depends on fluctuations in the prices of buying and selling an asset, or more precisely, on the difference between them. If the closing price is higher than the opening one, you will get additional income. If the opposite happens, you will lose the funds invested in the trade.

Note! The maximum loss on CFD trade reaches 95%.

Frequently Asked Questions (FAQ)

To better understand CFD mechanics, let’s break down some of the most frequently asked questions from Binomo traders.

Why are CFD trades closed after 15 days?

Since CFD is available only on a demo account, Binomo decided that 15 days is the optimal time to understand the mechanics and find effective strategies.

If you need the trade to stay open longer than this period, consider auto-closing. After that, you can open a new trade with the same conditions.

Why can I only trade CFD on the Binomo demo account?

CFD mechanics are new to the platform and is currently being developed. It is available on the Binomo demo account so that you can familiarize yourself with it and test various strategies without risking your funds.

Note! Follow the Binomo news to be the first to know when it will be possible to trade CFD on real accounts.

What is a multiplier?

A multiplier is a number by which your initial investment in CFD is multiplied. The Binomo platform offers five variants, i.e., 1, 2, 3, 5, and 10.

Multiplier allows you to trade with a much bigger amount than you deposited and get more additional income. Suppose your initial investment in CFD was $50, and you selected a multiplier of 2. This way, you’re trading with a budget of $100, and total profitability will be calculated based on this increased amount.

Why is the commission charged on CFD, and how is it calculated?

A commission is charged for trading with CFDs, but it does not require real funds and is deducted from the Binomo demo account. The fee was added for a more detailed imitation of real trading. Commission calculation allows beginner CFD traders to master money management principles, which are important for mechanics.

The commission is fixed at 0.02% of the trade volume, which can be calculated using the following formula:

Investment x multiplier

To determine the commission’s size, you need to multiply the trade volume by 0.02%. For example, if an investment of $50 is made with a multiplier of 2, the commission will be 50 x 2 x 0.02% = $0.02.

How to calculate the profit and loss on a CFD trade?

Binomo stipulates specific formula to calculate profit and loss on a CFD trade:

Investment x multiplier x [(closing price / opening price) – 1]

Suppose your investment in CFD on Binomo is $100, and you set a multiplier of 3. This makes you eligible to trade with a budget of $3000, and profitability will also be based on this number. Let’s assume that when you started the trade, the asset’s price was $10,000; when you closed the trade, it stood at $15,000.

Plug these numbers into the formula:

100 x 3 x [(15,000/10,000) – 1] = 300 x (1.5 – 1) = $150

So, you received an additional income of $150. The primary reason for this was an increase in the asset’s closing price compared to its opening price. Had vice versa happened, that would have resulted in a loss.