Mastering CFD Trading

Friday, April 6, 2018, 6:00 AM | Leave Comment

Contract for difference (CFD) is a by-product that enables you to stake on the price fluctuation of a given financial instrument like shares and commodities.

It can be viewed as a treaty between two parties on trade on the difference between the opening and closing prices of a financial tool.

Profits made in the business arises when one sells, and the prices go high and a loss when one sells at a cost lower than the buying price.

With this, one can speculate on the price fluctuation of several financial platforms. Leverage products, contract for difference being among them are the financial instruments that give a chance to the trader to observe the trends in market forces without one increasing the initial capital invested.

Therefore taking a risk in such trading is worth it as the returns are excellent if they work in your favour.

However, a comprehensive knowledge is required on how to stake in contract for difference as making profits is always the theme of the day for one taking part in the trading.

Given the current market trends globally, extensive know-how and a good platform to run such portfolios by traders is required to help one to make important buying decisions rationally.

Several companies, among them CMC markets offer such services allowing one to have access to the latest market news, the profile information on market and customizable charts.

Contract for difference involves high risks and may be seen as for:

  • Those who are well informed on the current market trends and understands all the terminologies involved.

  • One who is evading tangible assets in their trading.

  • Does one want to dodge using the tax-deductive advantage of contract for difference?

  • One who wants as a tax deduction to balance between losses and profits?

Contrary to spread betting which is almost similar to CFD, CFD has no expiry dates (exemption of forwards and binaries) it is not classified as gambling and charges are commission based over a period. However, it is subject to taxation and has direct market access.

For the companies providing the trading platforms, they may have manual or automated trading. Most of them offer options for demo account where one trades with virtual money before they venture into real-time trading.

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