What is CFD Data? Why Use CFD API?
07 December 2022
CFD as an investment instrument is gaining enormous popularity over the last few years. Traders prefer this investment method because it allows them to speculate on the price movement of a financial instrument without actually buying it. Similarly, enthusiastic fintech companies have been offering online platforms to trade CFDs.
The digital environment on a global scale requires CFD data and especially CFD API to function effectively. If you wish to learn more about, you are in the right place. Keep reading to grasp the meaning of CFD and how CFD Data API is revolutionizing this arena.
What is CFD?
CFD (Contract for Difference) is a contract between a trader (buyer) and a CFD Provider. CFDs are traded by speculating the price change of an underlying asset. Both parties agree to cash-settle the difference between open and closed trade prices.
Notably, the trader does not need to own the underlying asset, which may be stocks, indices, forex, precious metals, or commodities.
CFDs provide an opportunity to traders to anticipate the price movements of underlying assets without buying or selling them. So, how does CFD work? Well, we will discuss it in detail later in this article.
Understanding the CFD API
The availability of the internet and the ever-growing popularity of handheld browser-enabled devices has changed the dynamics of trading in the CFD Markets. Investors and traders can trade CFDs online through trading platforms without any physical commute.
Notably, CFDs are not traded through central exchanges similar to NASDAQ. A network of over-the-counter (OTC) brokers hosts these trades. So, if you are developing a CFD trading platform or a trader in the CFD space, do you need to gather CFD rates from various OTC broker-dealer networks?
CFD Data API makes your life easier. CFD REST API provides real-time and historical prices of various underlying assets, including stocks, indices, forex, energy, and precious metals. Well-known data vendors acquire CFD trading data from reputed OTC brokers and aggregate it to provide an unbiased, real-time price feed.
Contract for Difference Data API helps you retrieve real-time, tick historical, end-of-day, and intraday OHLC prices of wide-ranging financial instruments. Thus, companies and individuals can concentrate on their core business without worrying about the quality, reliability, and accuracy of CFD trading data.
How Does CFD Work?
While trading CFDs, the trader speculates in the financial markets without buying or selling the underlying assets. CFD tracks the price movements of financial instruments without owning them. So, there will not be any physical delivery of a product or service.
Importantly, any CFD contract doesn’t consider the value of the underlying asset but only the price difference between the current value and the value at the time of the contract.
Traders can open a trade by buying a CFD for an underlying asset if they anticipate a rise in its price. Similarly, they can sell if they speculate the price will fall. The traders should open a sell position and close it by buying an offsetting trade.
So, CFDs provide an opportunity to anticipate an increase or decrease in the price of an asset. There is no physical delivery for a CFD. Secondly, CFDs can be leveraged. So, traders do not need to invest the entire value upfront. Depending upon the regulations, they can initially put about 5% of the cost. However, the profit or loss is calculated on the actual asset value.
Let us analyse the working of CFDs through a simple real-life example:
Suppose a trader wants to buy CFDs for Microsoft Corporation shares. The current price of Microsoft Corp is £240. The trader buys 50 contracts at £10 each, speculating that the share price will rise to £243.
If the trader successfully close the position at £243, the trader will make a profit of:
Profit = (Number of contracts X Value of each contract) X (Price difference)
= (50 X £10) X (£243 - £240)
Please note that we are not considering the commissions and other charges here. For calculating the net profit, we need to deduct these expenses.
Also Read: CFD Stocks Explained
From this example, you can realise that trading in CFDs may lead to good profits if prediction and trading decisions are right; and may also lead to huge losses if the price movement occurs in an opposite direction. Therefore, conducting thorough market analysis using CFD data API is crucial to make informed trading decisions.
Who Uses CFD API?
Data API for CFD provides businesses and individuals with complete peace of mind, as they can conveniently access real-time CFD prices and historical data. Let us drill down who uses CFD API and how it supports various purposes:
Developers building analytics, charting, and trading solutions for CFDs require an accurate and reliable CFD data feed. An API for CFD Data helps them add data retrieval features to their financial products and solutions. Developers can integrate CFD Data API into their applications, websites, and trading portals so that users can get trustworthy CFD rates.
- Algorithmic Traders
Algorithmic traders need accurate CFD data down to the tick to conduct in-depth market analysis and to draw and test their trading strategies and algorithms. CFD REST API from reputed data vendors is dependable for determining and executing trading strategies using it as a reference feed. CFD Data Feed helps analyse historical data to make informed trading decisions.
- CFD Providers or Brokers
A CFD provider is a market maker or broker serving as an intermediary between the traders and the financial markets. They allow traders to access financial markets through their trading platforms equipped with essential trading tools such as trading instruments and technical analysis tools.
The CFD brokers require reliable CFD market data for quality assurance, backup purposes, and also to create their own quotes. CFD REST API helps them add data-capturing features to their trading platforms and access accurate CFD data for various purposes.
- Blockchain Companies
Fintech companies use Data API for CFD, crypto, and forex to develop advanced financial products based on blockchain technology. Similarly, node providers use CFD Data API to access prices of financial instruments related to the CFD markets and provide the information to execute on-chain digital smart contracts.Similarly, crypto traders can also trade CFD instruments via smart contracts leveraging the CFD API.
Smart contracts are gaining popularity across various sectors as they automate the approval workflows and clearing calculations to execute a contract quickly and transparently. Smart contracts are transforming banks, financial institutions, and various other sectors.
According to reliable sources, the current decentralised finance market size (in 2022) is about US$ 13.6 Billion. Decentralised Apps, smart contracts, and other solutions based on blockchain technology have a wide scope and great growth potential.
Benefits of CFD Data API to Businesses
CFD data feed through API provides a reference feed to access real-time CFD and historical data for various underlying financial assets. Let us understand how the API benefits businesses:
Access to Wide-ranging CFD Markets’ Information
As discussed above, Data API for CFD is an effective way to access valuable information related to wide-ranging financial assets based on which the CFDs are traded. It is time-consuming to obtain data from various sources and aggregate it.
You can access a curated price feed in real-time through the API. The API also provides historical CFD data down to tick. Thus, your business will have a trustworthy source of an accurate reference feed to execute numerous tasks.
Data Visualisation and Analysis
Through the Data API for CFD, users can communicate with the data vendor’s ecosystem and receive valuable information on the price movements of financial instruments. It becomes easier to visualise the data and conduct an in-depth technical analysis to get actionable insights. Proper market analysis through effective methods like backtesting is essential for data-driven decisions.
Also Read: What is Backtesting in Forex
You save your valuable time as you don’t need to gather price feeds from various OTC brokers and aggregate it. The API helps you access CFD market data, analyse the market thoroughly before placing trades, and make informed decisions.
How Tradermade Helps Small Businesses with CFD Data API
TraderMade has been offering unbiased, accurate, and reliable market data for CFDs for many years, with an approach to making market data accessible to all. You can obtain live and historical CFD data customised to your technology needs via JSON REST API and WebSockets.
Small businesses can benefit from a free API key and flexible data subscription plans.
The Data API for CFD covers data for 40 CFD markets. The recently launched API endpoints help you keep track of the CFD market open or close status, as these are not open around the clock.
Work with TraderMade - the trusted data partner for thousands of clients, to enjoy the benefits of CFD API and make your business reach new heights of glory.