{"id":62092,"date":"2014-10-17T07:58:45","date_gmt":"2014-10-17T11:58:45","guid":{"rendered":"http:\/\/countingpips.com\/?p=62092"},"modified":"2014-10-17T07:58:45","modified_gmt":"2014-10-17T11:58:45","slug":"exploring-the-merits-of-cfd-trading","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/10\/exploring-the-merits-of-cfd-trading\/","title":{"rendered":"Exploring the Merits of CFD Trading"},"content":{"rendered":"
October 17, 2014<\/div>
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By Susan Wade<\/strong><\/p>\n

Exploring the Merits of CFD Trading<\/strong><\/p>\n

The CFDs or Contract for Difference entails the concept earning profits or suffering losses based on the price movements in the market. It refers to an agreement between someone holding a share and someone who is willing to profit from the price move of the share, without really owning it. There are several advantages attached to CFD trading. However, before exploring the reasons why you should invest in cfd trading; let\u2019s delve in to how it actually works.<\/p>\n

CFDs: How do they work?<\/strong><\/p>\n

The success of a trader with CFD largely depends on his ability to predict a market movement. If he predicts that the price of a product will fall then he can actually sell it. Needless to mention, he will buy it if he feels that the product price will rise. Only if the market moves in accordance with his predictions will he experience profits, otherwise he will end up incurring losses. This form of trading might include equally high and low leverages. Traders can roll over the CFDs if the trade positions are not completed. It\u2019s best to be guided by an online forex tutorial<\/a>\u00a0in order to know more about it.<\/p>\n

Advantages of CFDs<\/strong><\/p>

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There is a string of advantages of CFDs to be explored by traders. Go further through the post in a bid to find out what they are.<\/p>\n

Trade without holding an asset<\/strong><\/p>\n

The first and foremost merit of trading with CFDs is that you are not really required to hold any asset. If you are taking up a large position along with a security it would typically mean that you have to drive up a large share because of sustained buying. This does not really lead to competitive pricing. Traders can evade this situation by buying CFDs\u2014thereby entering in to a contract directly with the holder of the asset, without acquiring shares.<\/p>\n

High Leverage<\/strong><\/p>\n

Just owing to the fact that cfds require very low margin (which can be as low as 5% as well!) the leverage can shoot up to even as high as 20 times greater than that of the holder of the asset. However, it should be remembered that leverages can hit quite low as well and in that case you will end up suffering major losses.<\/p>\n

Freedom to trade long or short<\/strong><\/p>\n

It gets very easy for you to trade long or short (viz in the bull or bear market).<\/p>\n

No Expiry Date<\/strong><\/p>\n

The CFDs do not expire unlike the options which have well-defined expiry dates. If you don\u2019t exercise your options within the expiry date then they will run out useless. The Contract for Difference is not subjected to the adverse effects of time decay. However, if traders are required to hold trades overnight they should pay the relevant fees.<\/p>\n

Dividend Sharing<\/strong><\/p>\n

Much to the joy of traders, even if they do not own the assets they get to share the dividends.<\/p>\n

Simple and Economical<\/strong><\/p>\n

CFD trading is quite simple to comprehend. Plus they are considered to be much more economical options when compared to options, futures, indexes, equity shares, funds etc. The broker fees or commissions can turn out to be quite high as compared to that of the CFDs.<\/p>\n

Guest article by Susan Wade<\/strong><\/p>\n

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By Susan Wade Exploring the Merits of CFD Trading The CFDs or Contract for Difference entails the concept earning profits or suffering losses based on the price movements in the market. It refers to an agreement between someone holding a share and someone who is willing to profit from the price move of the share, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-62092","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/62092","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=62092"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/62092\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=62092"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=62092"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=62092"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}