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Investing 101: 5 Reasons CFD Trading Might Be For You!

Vivian Michel
Written by Vivian Michel

Looking for a trade to get into? Sure enough, you’ve already heard about forex, precious metals, stocks, indices, commodities, bonds and cryptocurrency. But what if we told you there was a market that allows you to trade all that through contracts?

It’s called CFD trading and this allows you to buy and sell assets through their underlying value. So there’s no need to take any physical hold on the assets. CFD stands for Contract of Difference, so trades are executed through contracts.

This is a great trade for all sorts of traders whether you’re a novice, a seasoned trader or a small or big investor. If CFD trading interests you, why seal the deal and know if this trade is for you? Down below are its various benefits!

1. It Has Great Leverage

IFC Markets

One of the things to expect in CFD trading is its grand leverage. Although leverage can be seen as both a good and bad thing, it actually depends on the trader. If you see leverage as something you can take advantage of, this instantly becomes a benefit to you. So it’s really up to how you play with it.

For small and starting traders, leverage is their best friend! This allows them to start with small capital but earns big in trades. In CFD, you can expect leverage to be 1:50, so your $1000 can become a whopping $50,000 in a single trade.

2. Offers Low Trading Costs

Investopedia

What makes a successful trader is a greedy attitude. And luckily CFD trading doesn’t have to bring out that side of you. Unlike other trades, CFD offers little to no trading costs, which can make a great difference in the payout.

Added costs in something other traders overlook but it’s actually affecting their overall profit. That’s the time you have to let out your greedy self, to make sure your profits aren’t affected! Especially if you’re a day trader who makes money from small market movements, fees can greatly affect your daily income.

3. You Can Profit From Bull and Bear Markets

Mint

Unlike other trades, you can profit from increased and decreased market movements in CFD trading. So it’s the best of both worlds! To fully understand this, you need to know what bull and bear markets are. If you already do, you can simply skip this part.

Basically, bull markets are securities that are on a rise, so these are markets most trades look forward to. For bear markets, these are securities that are declining or are staying stagnant. Bear markets are the nightmare of most trades out there, but for CFD trading, it’s still a chance to make a quick buck.

4. Options, Options – OPTIONS!

AppsGeyser

Another thing to look forward to in CFD trading is its options. In this trade, you can enter various markets like forex, cryptocurrency, stocks, precious metals and more all at once. So it’s easier to find your niche market this way without having to try out trades one by one.

Plus because of its wide scope of options, this allows you to expand your trading portfolio! You can also switch to whichever trade that’s currently trending without breaking your back by switching to another trade.

5. It’s Profitable!

Trade Brains

Probably the answer everyone has been waiting for, yes, CFD trading is profitable! Provided you learn about the trade and market you’re getting into, have a trading strategy, use trading tools to speculate and work with a great trading platform.

Once you have all these, your chances of becoming a successful trader heighten. The average profit most successful traders make is around 10% of the return. So it’s safe to say this trade is fruitful and a great trade to consider.

A Bonus – It Has No Expiration Date!

And you thought we could narrow down how great CFD trading is with 5 items! Another great thing to expect is its limitless contracts. CFD trading, again, unlike other trades does not have an expiration date, giving you all the more reasons to invest!

Especially if you’re a position trader, you don’t have to worry about your trades expiring when holding them for months to years.

Take Away

With all that’s been said, you probably already came up with a conclusion if CFD trading is for you. But if you’re looking for something similar to CFD trading, you can always consider other derivatives like Forward, Future, Options and Swap contracts.

But whatever your decision might be, you still know the great benefits that come with CFD trading. So use your new-found knowledge to make an accurate choice as to whether to enter this trade or not.

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Vivian Michel

Vivian Michel

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