Many people are talking about CFD trading online, and it is gaining popularity because of the several advantages it provides. The clear advantage of CFD trading is that it gives investors an opportunity to profit without actually owning the underlying asset. Unlike the usual share dealing, a CFD is accomplished when a contract between two parties such as the client and the broker are settled.
If you are thinking of diving on this venture, you need to know some major advantages it offers so your decision making will not be that hard.
There’s no stamp duty.
The traditional share trading requires you to pay stamp duty while CFD trading does not. This is because you don’t own actual or physical asset from the company you are investing. In CFD trading, you are only predicting the future value of an index, share, currency, or commodity. However, tax treatment on this particular trading can change as it depends on individual circumstances.
You can earn money even when the markets rise or fall.
CFD is good for people who are afraid of investing their money. As we all know, traditional trading will only work when the prices on the market rise. However, CFD is much different. Making use of your capital on CFD trading does not come with a great risk. You will surely earn a profit even when the product goes up or down. Aside from that, you can use a CFD trading app to manage risks by monitoring your account’s performance.
You can trade using a margin.
One of the major advantages of CFD is that you can trade by using margins, which provides you leverage. Through leverage, you can make use of borrowed money as a strategy to increase the potential return on your investment. CFD also provides investorswith higher leverage more than traditional trading can give. However, the increase in leverage can magnify the risks. It is important for traders to comprehend the risks that margin and leverage carry before deciding to take advantage of CFD trading.
You get access to international markets.
With CFD, you can access a much wider range of global markets, including international and domestic equities, currencies, indices, and so on. There are a lot of CFD brokers offering many products from the world’s biggest markets, allowing investors 24-hours foreign exchange trading. Some markets are not open 24/7, but CFD trading will help you maximize a variety of trading opportunities with a lot of currency pairs to choose from.
A huge amount of capital is not required.
Some markets require investors to give a minimum amount to day tradeor put limits on the amounts of capital in order to make a certain account. The good side of CFD is that it is not bound by this restriction, and all investors can have access and day trade every time they wish. You can open a CFD account with a capital as little as $1,000 to $5000.
With the advantages of CFD trading mentioned above, you might already think of venturing in this field. Before you take your leap, however, make sure that you have understood at least the basics of trading CFDs. This way, you will get the best possible results.