CFD Trading And Its Four Main Features.
CFD trading is preferred by numerous individuals as it provides great flexibility, which is required to trade in current markets. If you trade CFDs you will be able to use a mix of leverage and lower transaction costs, and accordingly this means that you will be able to maximize your returns.
As a matter of fact, there are several fundamental characteristics that make CFD trading so well-liked and in this article we will consider them in more details.
Characteristic #1: Leverage
In other words leverage is the ability to do more with less. But while trading contracts for difference, it is necessary for you to understand this may mean for you not only earnings but loss as well.
It should be mentioned that CFD trading leverage allows traders to take the best advantage of market changes. To go into more details there is a need to add that only 5 percent of the money should be put down on most trades. The balance 95 percent is financed by the trading firm. So, there is a possibility to gain 50 percent or even more in just one day even in the case the market moves less than three percents.
Characteristic #2: No Contract Size
CFD trading is comparable to trading financial derivatives. The fundamental difference is that there is no smallest size of a contract. To put it differently it is possible to trade CFD for one single stock. This means that CFD provides flexibility, since the investment need not be in multiples of lot sizes.
Characteristic #3: No Expiry Date
One more focal thing that makes CFD trading different from futures trading is the detail that there is no expiry date. As you know, when a person deals with futures contracts, as soon as the expiry date is near, the number of buyers for a contract is considerably falling. It should be besides added that liquidity crunch exerts a downward pressure as the contract comes near its expiry dates. As concerning CFDs, they are absolutely free of such false price drops.
Characteristic #4: Lower Transaction Costs
You need to be ready for that CFD trading may cost more in terms of brokerage in some countries. But the whole idea was invented to take advantage of positive taxation treatment towards gain from stock markets. It will be helpful for you discover that it declines your tax bill and raises your income.