Why is Everyone Talking About CFDs?

CFD trading has completely revolutionized the trade market with its flexibility, higher leverage and a wide variety of trading options. Most people opt for this trading method for the multitude of benefits it comes with. A CFD or contract for difference is a trading method where an agreement is made between two parties for exchanging the difference between the opening and closing price of a product. The CFDs are mostly the derivatives of products that lets you trade under the live market price movements without having you to own the particular instrument on which your contract is made.

It has gained a wide visibility in the trading sphere as the CFDs can be used for speculating the potential movements of the market prices regardless of the rise and fall of the underlying markets. You can either sell your stocks, thereby gaining profits from the low prices, or can also hedge your portfolio for evading the scopes of any potential loss with regard to the physical investments. Additionally, with more than 12,000 markets associated with this trade, you can also gain an opportunity for a better exposure of markets that haven’t been accessed by you before. This trading method offers you a complete insight on the prices of shares, indices, commodities, currencies and many more objects.

What is different about CFDs?

Well, the simple difference between a conventional trade and CFDs are the entry and exit points. A CFD can be termed as a highly tradable unit that can be used for mirroring the movements of the various properties/ assets that are underlying it. It gives a scope for realizing the profits for the losses, when the underlying asset is seen to move in a relationship with the position taken, without owning the actual underlying asset. In simpler words, this is a contract between the broker and the client. Trading CFDs comes with a series of advantages and it is these advantages that have increased the popularity of the varying instruments over the last couple of years.

Higher leverage

One of the best reasons for choosing CFDs is because of the high leverage that it renders. The standard rate of leverage in the contract for difference trading market starts from a margin as low as 2%. Depending on the particular underlying asset (shares for instance) the margin requirement may be up even to an extent of 20%. Lower requirements for margin simply mean lesser outlay of capital by the

Access to the global platform

CFD brokers mostly offer products that are accessible in all the major markets across the globe. This further implies that the traders can now trade from any market, considering the fact that the concerned market is open from the platform of the broker.

No particular rules for shorting

Generally, most stock markets come with a set of rules that prevents shorting at different intervals. It also requires the relevant trader to borrow the trading instrument before the process of shorting. There might also be different requirements of the margin during the shorting while being opposed for the longs. The CFD markets on the other hand, do not have any particular rules for short selling. Any trading instrument can be shorted according to the trader’s discretion and as there is no exact ownership regarding the initial asset, there are also no costs associated with borrowing or shorting.

Professional solutions without any fees

The CFD brokers mostly offer orders that are somewhat similar to the traditional brokers. Some of them would be the contingent orders, stops and even limits. A couple of these brokers also provide the advantage of guaranteed stops. The brokers that are likely to guarantee the stops either charge a specific fee for the service or get their revenue in an alternate way. In most cases, no such fees are charged while trading CFD. Most of the broker professionals do not charge any fees or commissions for entering or exiting a trade. Instead of this, the broker gets his money by asking the trader to pay for the spread.

No particular trading requirements

Unlike conventional trading techniques CFD trading does not require any specific minimum account for its day trade. It gives the trader the authority to trade according to his discretion.

In case you’re willing to know more about CFDS trading visit the official website of CMC markets. Here you will find the best trading advice and options for the contract for difference trade.

Edwin C

Edwin is a marketer, social media influencer and head writer here at Cash Syndrome. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.

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