The Contract for Differences or CFD can be defined as a derivative platform for trading instruments. It provides traders with opportunities to trade on the movement of prices of various financial assets. These assets can be commodity futures or equity indexes. Investors find it incredibly simple to speculate on different types of the market through this platform. It is often used to diversify trading investment in global markets. Investors can use advanced tools like metatrader which comes with a metatrader cfd trading guide.
Features of Contract for Difference;
The reason why CFD is so popular is that they are products that act on leverage. This enables investors to proceed with trading by putting in money for a small segment of the contract. Thus, he can maximize his profits by getting a handsome return on his investment. Apart from this, there is an entire list of unique features, some of which are discussed below:
- A large set of different markets
CFD can be put to use in a wide variety of markets. These may include commodities markets, currency trading (Forex) or share markets. Traders can utilize CFD to enter important markets like U.S.A, Japan, U.K and Australia. If this process is too cumbersome for an investor, then she could use computer programs like MetaTrader CFD trading.
- Trading remains open for 24 hours
Very similar to Forex, CFD accounts come with 24 hours continuous access capabilities. So, traders can continue to participate in active transactions even if the underlying market is closed down. This is a crucial feature as some major markets remain active for 24 hours.
- Stamp duty cannot be imposed on CFD
As discussed above, this type of trading is based on leverage. So, a trader does not own any instrument himself. As there is no ownership, no stamp duty can be imposed on trades made by investors. Although this might differ from one place to another as various tax laws call for different options.
To mitigate this confusion of tax imposition investors can avail the services of software like MetaTrader CFD trading. This can automate the process of information gathering and decision analysis.
- Options to go Long or to go Short
In Forex, investors can choose to buy currencies when they feel that its value is going to appreciate against another currency. In the same way, if he believes that currency value will depreciate, then he can sell his currencies to avoid losing. This process of buying is called “going long, ” and selling is termed as “going short.”
Investors try to maximize their profit in any CFD trading platform by alternating between going long and short. Today computer applications like MetaTrader CFD trading software help traders to automatically execute these transactions; which improves accuracy and excellent tunes timing of closing purchase/sales.
- CFD platforms do not have any time limit on its shares or commodities;
Markets that come under CFD like shares or Forex trading platforms do not come with any rigid time limitations on its trading elements. So, traders can close their deals at their own desired time.
Summarizing, one can say that trading in CFD comes with a lot of favorable perks. Moreover, with the invention of innovative applications like MetaTrader CFD trading software, this process of competitive trading has become much simpler.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.