How Does Mitrade.com Work? The Mechanics of CFD Trading

Understanding how mitrade.com operates requires delving into the mechanics of Contracts for Difference (CFD) trading, which is its core offering.

Unlike traditional investing where you buy and sell actual assets, CFD trading involves speculating on price movements without ever owning the underlying financial instrument.

This distinction is crucial for comprehending the risks and ethical implications.

The Core Principle: Speculation on Price Movement

At its heart, CFD trading on Mitrade.com is about making a bet on whether the price of an asset (like a currency pair, stock, or commodity) will go up or down.

• No Ownership: When you trade a CFD on, say, Apple shares, you don’t actually own Apple shares. You enter into a contract with Mitrade (the broker) to exchange the difference in the asset’s price from the time you open the contract to the time you close it.
• Going Long or Short:
  • Buy (Long) Position: If you believe the asset’s price will rise, you “buy” a CFD. If the price goes up, you profit from the difference. If it falls, you incur a loss.
  • Sell (Short) Position: If you believe the asset’s price will fall, you “sell” a CFD. If the price goes down, you profit. If it rises, you lose.
• Leverage: This is a key component. Mitrade.com offers “flexible leverage.” Leverage allows you to control a large position with a relatively small amount of capital (your “margin”). For example, with 1:100 leverage, a $100 deposit could allow you to control a $10,000 position.
  • Amplified Gains: A small favorable price movement on a leveraged position can result in significant profits relative to your initial capital.
  • Amplified Losses: Conversely, a small unfavorable price movement can lead to magnified losses, potentially wiping out your entire margin deposit very quickly. Mitrade.com’s “Negative Balance Protection” aims to prevent you from losing more than your deposit, but losing your entire deposit is a very common outcome.

The Trading Process on Mitrade.com

The website outlines a “Start Trading in 3 Easy Steps,” which simplifies the user journey but omits the complexities of the actual trading environment.

1. Registration:
   • This involves completing an account application, which typically requires personal information (name, address, date of birth), identity verification (uploading ID documents), and sometimes proof of address.
   • Mitrade.com offers “Open Live Account” and “Try our Demo Account.” The demo account is crucial for new users to practice without real money, though it can also create a false sense of security due to the absence of real emotional and financial pressure.
2. Deposit Funds:
   • Users select from “a wide range of payment methods” to fund their live trading account. These typically include bank transfers, credit/debit cards, and various e-wallets.
   • The deposited funds act as the capital that can be used for margin to open leveraged positions.
3. Start Trading:
   • Once funds are deposited, users gain access to the Mitrade trading platform (Web, Desktop, or Mobile App).
   • On the platform, users select the market they want to trade (Forex, Indices, Commodities, Shares, ETFs).
   • They then decide whether to buy or sell, the size of their position, and apply risk management tools like Stop Loss and Take Profit orders.
   • Trades are opened and closed based on market price movements. The profit or loss is credited or debited to the account balance.

Revenue Model and Costs

While Mitrade.com advertises “Zero commissions,” it’s important to understand how they generate revenue and the costs incurred by traders.

• Spreads: This is the primary way Mitrade earns money. The “spread” is the difference between the bid (sell) and ask (buy) price of an asset. For example, if EUR/USD is quoted as 1.1000/1.1002, the spread is 2 pips. When you open a trade, you immediately start at a slight loss equal to the spread, as you buy at the higher price and would sell at the lower price.
• Overnight Financing Fees (Swaps): As discussed, if you hold a leveraged CFD position open overnight, you will typically be charged an interest-based fee (or, less commonly, receive a small payment). These charges are determined by prevailing interbank interest rates and the size of your leveraged position. These fees accumulate daily and can significantly erode profits or deepen losses over time, especially for positions held for more than a few hours.
• Other Potential Fees: Users should always review the “Fees & Charges” section for any other potential costs, such as inactivity fees, withdrawal fees, or guaranteed stop-loss order fees.

In essence, Mitrade.com works by providing a platform for leveraged CFD trading, allowing users to speculate on financial market price movements.

It simplifies the entry process, offers various trading tools, and employs common brokerage revenue models. Rejuvafresh.com Pricing

However, the inherent speculative nature, combined with leverage and interest-based overnight financing, makes it a high-risk activity with significant ethical concerns.