Is Online CFD Trading Better Than Regular Stock Investing? Find Out 3 Reasons That Prove It Is.
CFD trading is extremely widespread in lots of countries, such as United Kingdom, Ireland, Singapore and many more. But what is more important – a rising number of investors prefer online CFD trading to trading typical stocks. Why? Here the key three reasons:
CFD trading involves only a small margin payment to be paid by investors and not the complete value of the investment. The point is that CFD traders should pay only the margin required which could be as small as, 10%.
Needless to say that this quality attracts a lot of traders and if it seems particularly advantageous for you as well, you need to understand that it also includes some risk you just can not do not take into account. To go into more details it should be added that in the case the price of the stock falls then the investor can end up owing more than the initial sum he/she has invested. In this case the stockbroker makes a “margin call” requesting extra money and if an investor has not enough money to pay – he/she will have serious problem.
CFD traders are provided with a possibility to take “short” positions in stocks, so they can benefit and make money from lessening prices. If you are a beginner then you should also realize that shorting stocks can be a pretty difficult thing to understand, but you should just gain some knowledge and then you will see that, in actual fact, there is nothing extremely complicated about this aspect.
It will be useful for you to find out that it is vital to be cautious and know exactly what you are doing with shorting, for the reason that the risk factor is involved here as well. In point of fact, you may even lose a huge amount of money. For example, if the stock price of a company that the trader shorted enlarged (doubled, tripled), he/ she will be forced to get back the stock at a much higher price and this accordingly brings about large financial losses, which can be limitless, as, as you know, there is no higher limit to the share price.
Tax benefit is one more critical reason you need to have knowledge of in order to understand why online CFD trading is considered as a better one than regular stock investing. There is a need to underline that nowadays tax benefits are available in the UK and Ireland and some other countries. Basically speaking, when CFDs are used in these countries, there is no need to pay the tax on buying shares.