Are you an active investor looking for trading opportunities over financial markets? Trading CFD can be the greatest opportunity for you to trade on as many financial markets you like and manage all from a single trading account. There are many reasons why CFDsare better than other trading opportunities and we will discuss all the possible reasons why you should consider trading CFD over other investment opportunities.
Reason#1- Trading CFD costs less than investing in shares
When you are trading CFD you do not own the shares underlying and you just speculate on the movement of the prices of shares. Due to this reason when you trade CFDs you don’t need to pay the number of costs which apply when you buy shares or any other underlying assets. You don’t need to pay stamp duty, securities transfer tax or others. Also, the brokerage costs are always cheaper than the costs incurred in shares and you will be able to find many brokers who charge a less amount of money in commissions.
Reason#2- Through CFD trading you get a money multiplier effect
CFDs are geared instruments and this gearing helps you in boosting the potential gains you have. For example you are an investor who has only $100 in your pocket. With CFD trading you can open a trade with the position of $10000 by availing a leverage 1:100 offered by your trader. This means that your $100 can multiply your potential gain to 100 times with the same amount of money you deposit as margin. Thus CFD trading provides you the opportunity to get higher profits due to gearing up your money. But it has to be noted that trading on margins also magnifies the potential loss you can have if the trade goes in the direction against you. That is why it is vital to manage your risks effectively when trading CFD with margins.
Reason#3- Profit potential in both rising and falling markets
You can go long as well as short in trading CFD. If you feel that the share price is going to fall you can short it and if it falls in value you will make a profit. This feature of CFD trading makes it very comfortable for the traders and they can enjoy the benefits in both the rising as well as falling markets without having to worry about the direction of the prices.
Reason #4- No expiry date to worry about
CFDs do not have any expiry date and unlike other trading instruments like single stock futures. This means that you don’t have to worry about any trade to be closed automatically. But still you need to be aware of some issues which can happen over the time.