The reasons to trade in CFDs
CFD trading as the name suggests indicates a form of derivative trading. It means you are going to deal with prices emerging from the underlying market as it does not have any relation to the market itself. There are numerous reasons why CFD trading has gone on to climb the popularity charts
Leverage
With the help of CFD trading your capital can go a notch higher. The reason being you are going to need only a small fraction of the full value of the trade to open a position. This deposit that you incorporate is termed as margin. The amount of deposit indicates your position and the margin factor for the market that is chosen. But keep in mind that the total profit or loss is dependent upon the full position where the deposit does not have any role to play.
The short option
The CFD is a form of agreement where you can exchange between the opening or closing form of position. Hence for this reason it turns out to be a flexible form of trading. Even it is going to allow you to trade when the markets are heading in the downward direction. Once you are trading CFD on a trading platform, there are going to be a couple of prices listed that is the buying price and the selling price. If you feel that the market is going to go up in price then you will trade at the buy price and if it is going to go down in price then the sell price.
Trading in a huge rank of markets
With the aid of contracts there is a difference to be trading in over 17,000 markets. This goes on to include share indices, options, commodities and a lot more. Even there are no multiple platforms to be accessing the various markets. Each and everything is available under a single log in as it is possible to trade via your mobile browser, tablet and the phone. Even it is possible to be trading in some markets outside the operational hours. This is done so as to make the most out of company announcements. Just take note of the fact that the opening price of a market is going to differ from the closing price.
A lot similar to the underlying market
The objective of a CFD is to mimic the underlying market in every possible manner. When you buy a share of Apple CFD it can be compared to purchasing a share of Apple. Even it connotes purchasing a portion of the base currency where you end up selling an equal quote currency.
Share portfolio and hedging
An example is that you are holding a certain number of shares of a bank. Even you might be thinking of holding it for a longer period of time. You might be of the opinion that the banking sector is in a period of downturn and would be looking to offset any potential losses. Hence you end up opening a short position.