There is a steady growth of investors in CFD trading. More and more people are gaining interest in CFDs particularly because of their advantages. Investors can buy or sell assets without actually owning them, compared to traditional stock trading where stocks have to be bought in their full amount. Contract for Difference is a leveraged product that allows investors to take advantage of the underlying asset without the need of paying its full amount. Other than that, there are other wonderful benefits of CFD trading that everybody is talking about.
Trading on Margin
Just the thought of buying the entire value of the asset is already impossible to most retail traders. But with CFD trading, you don’t really have to put up with the full amount of the asset. Instead, you will only have to deposit a small amount out of the overall value of the underlying asset, most of the time, this is only 1 to 2% of the entire contract price. For instance, if you are planning to acquire an asset worth $100,000, you only have to deposit as little as $1,000 to $20,000 to start trading, depending on the margin requirement of the CFD broker.
That being said, the margin requirement of CFD is known to be much lower compared to when you trade stocks traditionally. Investors enjoy trading even with low capital and more returns if they were able to use leverage properly. But, it is important to emphasize that this leverage must be handled appropriately because the risks involved can be really huge.
Short trading is allowed
Both conventional stocks and trading stocks on CFD offer long trades. But when talking about short trading, there’s a huge difference between traditional stocks trading and CFD trading. Short trading stocks on CFD is a lot easier. When going for a short trade, the trader will be selling the asset with a price expected to fall later on but buys it again when the price is much cheaper. Most stock markets do not allow short trading which means it will be difficult for you to short trade the ordinary stocks that you have.
Wide access to the global markets
Choosing to trade CFD will give you the advantage of trading various kinds of equities from different countries and types of markets. You have an option to trade bonds, shares, commodities, and Forex. More importantly, you can trade these assets in a single platform and you won’t need to transfer from one platform to another when trading in different markets.
No need for requirements
There are no restrictions or requirements when day trading CFDs. This advantage can be enjoyed by both newcomers and experienced traders. Other markets will cost you a lot just to join day trading.
Trading anonymously is possible
In CFD trading, you are not obliged to go in public and use your real name. Trading anonymously is possible as this will help maintain the privacy of the trader. There is really no need to declare your trading positions when you trade CFD.
