What Are the Benefits of CFD Trading?
CFD trading is often touted as a way to become wealthy. What are the benefits of CFD trading? We’ll address the benefits of CFD trading relative to the risks and the benefits of contract for difference trading over other types of investing. We’ll include a few points in favour of CFD trading that you may not have heard of before.
Flexibility
One of the great benefits of CFD trading is its flexibility. First and foremost is the ability to profit from CFD trading whether prices are going up or down. The second benefit of CFD trading is the ability to trade almost anything with these contracts; you can use CFDs to make money on changes in prices on bonds, individual stocks, commodities, or stock indices. Yes, you can use CFDs to diversify your investments without actually owning those investments.
Another benefit of CFDs is that they have no fixed lot requirements. You can trade in CFDs for commodities and stocks you cannot afford to buy yourself. You can set up the CFD to only invest what you have and can afford to put at risk.
Yet another benefit is the number of CFD trading platforms out there, so you can select the platform that has the lowest fees, greatest support for users, or offers investments you’re interested in. Check out dividendmantra.com for a run down on some of the best platforms.
Risk Management
One of the apprehensions some have with CFD trading is that you’re trading on margins and can see losses significantly greater than your investment. However, on the other hand, you can see similarly multiplied rewards, which is what make CFDs so attractive to many. One CFD trading strategy is to bet more money on the direction you expect it to go and bet a small amount in case the price goes the opposite way. If you’re wrong, the payout from the second contract helps offset the losses from the first. And CFDs as a form of insurance against losses may be cheaper than other alternatives.
Security
It is amazing how many people think you have to buy gold coins or bullion to invest in gold. CFD trading allows you to make investments based on the price of gold going up without the security risk of having gold bars at home, which is a concern for many who want to invest in gold. You can use CFDs to hedge your investment portfolio so that you receive payment from a CFD to offset any losses in the stock market. You can even find CFDs to trade based on the price of Bitcoin without having to own Bitcoin yourself, a strong benefit of using CFDs over trying to acquire Bitcoin and wondering if it will be legal to own or sell later.
Convenience
You can access a CFD trading platform 24x7x365 to make trades. And with the flexibility of platforms nowadays, you can run your platform just as well on a tablet or mobile, as you would on any PC or laptop.
However, you should not stay up all night monitoring market reports or day-trade all day. This “always-on” behavior leads to emotional investing and increases the odds of mistakes. Like with any market, training with a clear head and emotions in check is essential.
Another benefit of CFDs is the ability to make trades that start and end when you want; now you don’t have to worry about investments while on holiday or trying to be the first to talk to your stock broker in the morning.
Using CFDs to invest in real estate indirectly or foreign currencies lets you profit from trends in that area without having to go through the legal hassle of owning foreign currencies, stocks or real estate. This makes it a perfect way to bet on certain economies outside the forex.
CFDs allow you significant flexibility in the time frame, investment options, and funding requirements. You can choose which platform you want to use based on your needs. If you were still uncertain about CFDs, I hope we were able to dispel some of your reservations. If you think CFDs are for you, we suggest you continue studying them and consider eventually trying your hands at a few of them.