CFD Trading and Its Advantages

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CFD (Contracts For Difference) allows profit from changes in the prices of stocks and shares. It can be defined as an arrangement made in a futures contract whereby differences in settlement are usually made through cash payments, rather than the delivery of physical goods or securities. Its trading is an effective speculative tool for trading indices, shares and commodities. For example if you buy a CFD on a stock that is $10.00 and its price rise up to $10.50, then your profit will be change in price. So if you bought 1000 CFDs of that stock, then your profit will be $500, minus costs.

In financial terms we can define a contract for difference as a margin product which makes use of leverage to enable you to collect higher returns. If you are an investor then by using CFDs, you do not end up paying the entire amount of the underlying asset. The term leverage is the ratio between collateral and the deal size and is used to describe the margin requirements. The term like leverages in contracts for difference even allows you to end up making fine reasonable profits.

Following are the basic advantages that have contributed substantially into making (Contracts For Difference) a very popular product:

  • CFDs are traded on margin so you can maximize your trading capital.
  • Profit form falling or rising markets by trading long or short.
  • No fixed minimum spread or invented price.
  • No minimum deal size.
  • No minimum deposit requirement.
  • Separate CFD account or one account for all financial products.
  • No stamp duty.
  • Instant execution and improved liquidity.
  • Interest paid on your free equity balance.
  • Commission-free index trading.
  • Automatic stop losses for CFD positions.

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