Have you heard what is CFD trading? CFD stands for Contract for difference and it provides a flexible way of financial trading in which you speculate on price movements of hundreds and thousands of financial products like currencies, shares, commodities, indices and more.
When you trade with CFDs you do not actually buy or sell any physical asset. You just buy or sell a number of units of CFDs depending upon whether the price of the underlying asset will go up or down. You gain the units you have purchased for every point the price moves in the direction you expected. For every move in the opposite direction, you make a loss.
What Is CFD Trading And Its Advantages
After you have understood what is CFD trading, XFR Financial Ltd tells us about its many advantages.
Good liquidity- The prices of CFD mirrors what is happening in the underlying asset market and therefore you gain the profit of the liquidity in the market underlying. Also you receive the benefit of the liquidity offered by the CFD provider.
Leveraging- In CFD trading you can make larger gains even if you trade with small deposits. This is called leveraging and higher leverage is offered which can range up to 100:1 which means you can deposit only a 1 percent of the total trade as deposit and trade with higher amounts. This deposit is margin and is used to cover the losses if you have. You can use of capital more efficiently with the leverage facility provided in CFDs.
Low costs of transaction- When you trade with CFDs, the brokerage costs are usually lower as compared to buying shares, stocks and other real assets. Additional costs of holding CFDs and other charges like stamp duty and extra are minimized in CFD trading.
Ease of trade- CFD trading is just as easy as other traditional ways of trading and you can trade online in CFD trading platforms after selecting the online broker of your choice. CFD is not confusing and very easy to understand.
Ability to trade in a multiple assets environment- CFD trading provides you to trade in many assets like Gold, Silver, indices, commodities, Currencies, treasuries and others and thus you can trade with diversified portfolio from a single account.
You can trade after the hours too- Some CFD providers provide you the ability to trade even when the underlying asset market is closed.
XFR Financial Ltd Explains The Disadvantages Of CFD trading
Leverage is a double edged sword. Your profits are maximized but at the same time your risk to losses is also magnified. Therefore it is very essential to apply the different money management techniques in leveraging CFDs while trading via XFR Financial Ltd.
Low capital requirements and ease of access can lead to over-trading
No rights as a share holder because you do not actually own an asset.
Since you do not own the underlying assets, you can’t transfer your position to a different CFD provider or broker and you can only deal with the current CFD broker with which you have opened the current positions.
To know more about what is CFD trading and its benefits, XFR Financial Ltd urges you to read more detailed articles on web from reputed sites.