Sunday, February 21, 2016
The Many Advantages of CFD Online Trading
Contract for Difference or CFD is basically an agreement between two parties about exchanging the differences between the closing and opening price of a certain contract. CFDs are products that can be traded on live market price movements; however, it is not necessary to own the instrument on which the contract is based in order to do the trade.
Basically, CFD online trading is becoming increasingly popular because you have the ability to protect the value of your investment account from incurring more losses if the market starts falling. You have more control in securing gains and cutting back losses. This kind of freedom and control are usually not available in other businesses. There are many advantages of CFD online such as the following:
Leverage combined with margin
Leverage is essentially the strategy wherein your CFD margin deposit can control an asset with tremendous value which will then provide you with trading impact and accelerated return. One of the biggest advantages of CFD online trading is the unequalled margin that is available in platforms today. Leverage in such cases can reach up to 400 to 1. Given this, a very small investment capital can actually control a significant trading amount which means gains are magnified. You should still maintain caution however, since magnification of gains can also mean magnification of losses. The way to resolve this is to ensure that you are fully prepared and be truly professional in your trading approach.
Efficiency in taxes and cost
CFD online is more advantageous in terms of taxes and cost efficiency because CFDs are only agreements to offset price movements and not transactions that involve ownership of assets. Given this reality, levies such as stamp taxes or shares are not imposed for CFDs. CFDs are generally exempted from taxes because technically there is no changing of ownership of physical asset.
Cost efficiency, on the other hand applies in minimized transaction costs because CFD trades do not involve commissions. Furthermore, there is no more fixed cost as well as expensive delivery, registration and custody expenses because brokers are eliminated; therefore, saving you precious time and money.
Availability of automated orders and alerts
The development of high and modern technology made online trading for CFDs so much easier. There are now sophisticated alarms and trade prompters that makes formulation and execution of standing orders very convenient. Such modern facilities enable you to minimize your losses and maximize your profits.
Convenience of CFD Online
One of the most obvious advantages of anything that has online features is convenience. With online CFD trading you can readily place your orders on various platforms and environments using only a single interface. You can readily get assistance 24 hours a day, 5 times a week using the customer service hotlines of leading companies. Moreover, you can do trading, monitor your portfolio through your smart phones, desktop computers, tablets – basically any gadget that you can hook up online. This opens so much since you can basically do business wherever you are and whatever time of the day.
Given all the above mentioned benefits of online CFD trading it is very understandable why this kind of trading is becoming more and more popular especially for traders that may not have large funds to begin with. If you are going to start trading CFDs, it is prudent to first know your capabilities both personally and financially and see whether which trading platform would be best for you.