The Benefits of CFD Trading

Contract for Difference or as it is shortly known as CFD is the contract that is signed between two parties, namely the buyer and seller. Its price is strongly connected to the underlying asset like an equity index, a single stock and commodity futures.

Being firstly traded in early 1990 on the stocks of London Stock Exchange CFDs were obtainable only to the institutional traders. They used them to hedge their exposure on the underlying asset. However, already at the end of 1990s CFDs became widely accepted by retail traders and they go on to attract numerous traders up till now.

A lot of advantages such as leveraged positions, low costs and time saving benefits have contributed highly to the development of CFD market.  The latter provides a great number of financial tools including stocks, commodities, derivatives, equity indices and currencies to bonds.
While deciding to close the position the parties take into account if the asset price has increased, the seller is going to pay the buyer the difference between the initial value of asset and its current value. Otherwise, i.e. in case of the decrease in asset value it’s the buyer who pays.

CFD is a unique opportunity for traders to get experience on various assets. They can take long position when the price moves up, and short position when the price goes down.
Why to trade CFDs?

CFD trading is actually more beneficial than trading the given asset directly. It is featured with the following benefits:

1. Highly liquid assets and quick access to a number of  markets through one brokerage account.
2. Possibility of opening leveraged positions through margin which helps to  enhance the profits.
3. Cost reduction because of the lack of taxes and hidden commissions.
4. Unlimited opportunities of taking long or short side trading.
5. Possibility to trade easily from diverse parts of the world.
6. Availability of 80 and more commodities, CFDs on stocks and major Equity Indices.
7. Accessibility of unique Golden Instruments.
8. Unique swap terms.
9. Continuous trading of Index CFDs after the closure of stock exchange.

How to trade CFDs?

On the trading platform NetTradeX it’s possible to find Commodities, Stock Indices and CFDs on Equities including one hundred trading tools. The whole concept and procedure of CFD trading is quite simple and has much in common with traditional currency trading. The trader buys CFDs expecting an increase in price value of the underlying asset or similarly sells them anticipating a decrease in the price of the underlying asset. This is the main factor of CFD trading as due it traders can make a profit depending on the market movement up and down.

The next essential feature of CFD trading is that it is traded on a margin basis. In other words a trader has a chance to open a position by depositing a very small portion of the total contract’s value based on the type of account and on the contract’s margin requirements.  However, together with the increase of profit the probably of losses also rises. Hence traders should keep funds to accomplish any undesirable move against their position and maintain margin requirements to keep the position open.


Author bio:
As an experienced content writer Anahit appreciates the unique style and original way of writing. Each article should be expressed in such a way that you can listen to “the voice of author”.   This is actually what she takes into consideration while creating content. The domain in which she is interested and therefore writes articles is Finance. You can find her articles on http://www.trading-techniques.com/.