What is CFD on stocks?
CFD (Contract For Difference) is a derivative contract trading where the buyer and seller agree to pay the difference between the buying price and the selling price of the shares. So in my opinion the term CFD is more suitable to be interpreted as a bet on the price of a stock going to be cheap or expensive.
A trader who predicts that the stock price will go up will take a buy position, while a trader who predicts a decrease in the stock price will take a sell position. If the prediction of the CFD share buyer is correct, the share price rises, then he will offer his holdings for sale and he will get a profit (margin) on the net difference between the purchase price and the selling price. Profits/losses will be settled through the investor's intermediary account (exchange) at the time of offset trading (close position).
There are 6 advantages of CFD stock trading as follows:
1. Two Way Profit
This allows traders the potential for two-way profits, whether the stock price goes up or down.
2. Diversification and Hedging
Traders can use CFD stocks as a diversified investment instrument, as well as the potential for two-way profits enabling CFD stock trading to be used as a hedge.
3. Leverage
There is a leverage feature in CFD stock trading, giving traders the opportunity to get bigger profits.
4. High Liquidity
Because purchases are not physical (only contracts), or only trading stock prices, order execution will be fast and very liquid.
5. Low Transaction Fees
Enables traders to trade well-known global stocks with low transaction fees.
6. Global Stock Trading with local money
To be able to trade global stocks you don't need to convert your local money to USD.
CFD (Contract For Difference) is a derivative contract trading where the buyer and seller agree to pay the difference between the buying price and the selling price of the shares. So in my opinion the term CFD is more suitable to be interpreted as a bet on the price of a stock going to be cheap or expensive.
A trader who predicts that the stock price will go up will take a buy position, while a trader who predicts a decrease in the stock price will take a sell position. If the prediction of the CFD share buyer is correct, the share price rises, then he will offer his holdings for sale and he will get a profit (margin) on the net difference between the purchase price and the selling price. Profits/losses will be settled through the investor's intermediary account (exchange) at the time of offset trading (close position).
There are 6 advantages of CFD stock trading as follows:
1. Two Way Profit
This allows traders the potential for two-way profits, whether the stock price goes up or down.
2. Diversification and Hedging
Traders can use CFD stocks as a diversified investment instrument, as well as the potential for two-way profits enabling CFD stock trading to be used as a hedge.
3. Leverage
There is a leverage feature in CFD stock trading, giving traders the opportunity to get bigger profits.
4. High Liquidity
Because purchases are not physical (only contracts), or only trading stock prices, order execution will be fast and very liquid.
5. Low Transaction Fees
Enables traders to trade well-known global stocks with low transaction fees.
6. Global Stock Trading with local money
To be able to trade global stocks you don't need to convert your local money to USD.
