why should a trader choose to trade shares CFDs?
When you trade CFDs on shares, you don’t actually own the underlying shares. Instead, you trade a contract that tracks the share price. Trading share CFDs has some unique benefits compared to just buying the shares themselves.
What are CFDs?
CFDs stand for “Contracts for Difference.” They allow you to profit from share price movements without owning the shares. CFDs mirror real share prices.
With CFD trading, you enter a contract with a broker. You make money if share prices rise and lose if they fall. You also don’t need to wait for a settlement like when buying shares.
Less Upfront Cost
Trading share CFDs requires less upfront money than buying the shares directly. You only need to deposit a small percentage of the full value. This is called margin trading. Low capital requirements make trading CFDs very accessible.
CFD trading allows you to leverage your capital. Leverage means you can put up $1,000 but trade $10,000 worth of share CFDs. Leverage amplifies both gains and losses from share price moves.
Go Long or Short
You can profit from rising and falling share prices with CFDs by going long or short. Short selling shares via CFDs can be an easy, low-cost way to capitalize on downward moves.
Since you need less capital upfront, you can diversify your portfolio across CFDs on shares of different companies and sectors more easily. Diversification helps manage overall risk.
CFD trading enables you to hedge against losses in your physical share portfolio. For example, you can short a CFD to offset potential falls in the actual shares you own.
Unlike options or futures contracts, share CFDs do not expire. You decide when to open and close your trades based on your outlook and strategy. No expiration reduces timing pressure.
Chart and Tools
CFD platforms feature advanced charting and analytics to analyze price trends and identify trading opportunities. The tools help traders make data-driven decisions.
Share CFDs are extremely liquid investments. You can enter and exit positions easily due to steady volumes and tight spreads. High liquidity keeps trading costs lower.
In summary, trading share CFDs provides easy and affordable access to stock markets around the world. The leverage, flexibility, constant liquidity, advanced tools, and low costs are some of the reasons traders choose CFDs over trading the actual shares. Consider trying to share CFDs yourself!