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Why CFD Trading Continues To Grow In Popularity

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In recent years CFD trading has grown in popularity because it offers the investor a number of advantages thanks to the ability to leverage flexible short trades and access a wide range of markets, with minimal attendant risks. Let’s take a look at these enticing advantages in greater detail:

First up is the ability to trade forex, indices, and CFD shares, as well as other asset classes. Because of this wide available range, there are very few limits to your trading. Forex also opens up a larger number of currency options.

The ability to profit from falling markets is another big advantage. One of the differences between traditional forms of trading and CFDs is that the CFD never puts you in the position of owning any underlying markets, which provides even more advantages like being able to go both long or short.

When opening a short CFD position instead of buying your chosen number of contracts you sell them. When you are ready to close your trade you can simply buy CFDs of the same number.

This adds much more depth to your trading by enabling you to continue to profit even when markets are falling in price.

For example, if your research shows that a stock might have a rough road ahead of it, rather than seeking out a new opportunity, you simply short the company by using a CFD, continuing to profit while the share price falls.

However, you could earn a loss if the stock rises instead of the predicted loss. To short a CFD there is no need to borrow, unlike in regular investing.

It’s nearly the same as going long, but you go short instead. Indices, shares, bonds, and commodities are all markets that are eligible for you to buy.

The next advantage is your ability to keep your capital. You have leverage when you never own assets that you are trading. Having this leverage lets you skip paying for the total value of any positions you open.

In lieu of this, you simply pay your margin deposit. The magic lies in the fact that you don’t have to outright make a purchase, you are just observing the market’s price movements and speculating on them.

Let’s now take a look at what CFDs have in common with traditional trading. CFDs are not alone in their ability to eschew purchasing any assets in order to trade in the financial markets.

There are also derivatives like options, spread betting, and futures. If traditional investing and trading is what you are accustomed to CFDs will probably feel more familiar than those other derivatives. 

The reason for this is that the contracts you are purchasing and selling are designed to mirror their representative assets.

Setting your position size is based on your decision regarding the number of contracts you buy or sell, with the underlying market’s standard unit of trading being represented by a single CFD. Considering that all markets are available on a single platform, switching from one set of indices to another is as simple as clicking a few times.

Good luck with your CFD trades!

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