Mar
Trading CFD Shares Has Many Advantages
Investors are turning to Contracts For Difference (CFDs) as a more flexible alternative to traditional shares trading.
CFD trading has numerous advantages over traditional shares trading
- Simplicity
- Learning to trade CFDs is quite simple
A CFD is an agreement to exchange the difference in value of a financial instrument between the time at which it is opened and the time at which it is closed.
The amount of money you make, or lose, is determined by the amount of contracts you hold multiplied by the difference in price at which you opened and the price at which you closed. Simply put, if you think a company’s share price is going to rise you ‘buy’ or if you think it likely to fall you ‘sell’.
The degree to which you are correct in your CFD trading affects how much you make or lose.
Small fees and Gearing
CFD share trading is all pretty much done online nowadays, which means you don’t pay any brokers fees.
You trade on margin, that is you pay a small initial deposit and that allows you to take a larger position than you would be able to in traditional shares trading. So, while profits can be substantial so to can losses.
If you are an experienced CFD trader, it will be interesting to note that some CFD providers offer Direct Market Access, allowing you to deal at the market price.
You will also have to pay a nominal rate of commission, typically around 0.10%.
Go long or short.
CFD trading is flexible enough to allow you to not only profit from rising markets (going long) but falling markets (going short) too.
Whether you’ve gone long or short on a share, the potential to make or lose money is the same.
Many different markets to choose from
The range of markets to choose from is extensive, not only shares, but stock indices, commodities and forex too. Some CFD providers also offer 24-hour trading on certain markets too.
it’s always important that to manage your risk sensibly.
CFD providers should provide you with a range of tools to do this, including trailing and guaranteed stops. Research specialist Investment Trends carried out extensive market research recently and then resulted in IG Markets being named as the largest provider of CFDs in Australia.
Also, IG Markets was judged Best CFD Provider for 2010 in Money magazine’s Best of the Best award. IG Markets provide an educational programme for beginners and an expansive range of expert seminars for the more experienced. They also offer Direct Market Access too.
Remember that CFDs are a leveraged product and can result in losses that exceed your initial deposit. CFD Trading may not be suitable for everyone, so please ensure that you fully understand the risks involved.