Possessing numerous major advantages CFD trade increased the popularity of this market instrument, as well as a number of traders using it. So, what is exactly CFD? CFD (contract for difference) stands for the difference between prices while opening and closing the trade. This instrument of trade reflects the moving of underlying asset but never owns it. Basically, this is a contract between the broker and the trader.
CFD analysis of advantages:
- Ability to get access to the global market from one platform. The major CFD brokers, such as Opteck, offer to trade the products from all big markets worldwide. The trader has an opportunity of easy trading any market during its working hours from broker’s platform.
- No borrowing stock or shorting rules. Some markets’ rules prohibiting shorting at definite times, forcing the trader borrowing the instrument first or require different margin values when it comes to shorting. CFD trade market doesn’t have any limitations for short selling. No borrowing or shorting costs is the reason of absence the ownership of the asset.
- No fees for professional execution. Brokers trading CFD market, Opteck as an example, offer many similar order types to like traditional ones. Traditional brokers often charge additional fees for executing one or another type (limits, stops, guaranteed stops and so on). No fees are charging for CFD.
- Larger leverage. CFD trading uses higher leverage comparing with traditional trading. Leverage of standard level while operating CFD market starts from 2% of margin demanding. Lower margin requests make possible to obtain larger potential returns while fewer investments. Though, higher leverage can also increase losses in case of unprofitable trade.
- The absence of day trading requirements. Sometimes markets demand the minimal amount of investments for day trading or create limits for day trades made using certain types of accounts. The CFD market doesn’t make these limitations allowing traders to day trade the way they want. Approximate minimal deposit amount requirement is around $1,000 though sometimes $2,000 and $5,000 can also be asked as an initial investment.
- Numerous trading options. These are including currency, commodity, stock, and index CFDs. Traders operating different financial instruments, after deep and detailed of market CFD analysis can consider CFD trading as a good alternative.