What is CFD – Contracts for Difference Trading

Contracts for Difference or CFDs are contracts between the seller and buyer to trade the difference in the current value of any of the following: commodity, share, index or currency, and the value at the end of the contract. A positive difference means the buyer gains profit while a negative means a loss to the buyer. The best part is that you do not need to physically own the assets involve. But that is just one of the benefits of CFDs. Here are more of them.

CFDs do not Expire
CFDs are renewed every time at the close of each trading and it is up to the investor, you, to decide whether to go forward with it. And you do not have to worry about how long you can keep your position open since you can trade at any time.

CFDs are Convenient
With CFD, you will only need one account to trade stocks, currencies, indexes and commodities. No need to open new accounts when you want to trade in the forex market. This saves you the hassle of managing several accounts and a lot of time.

CFDs do not have a Fixed Contract Size
CFD is a contract but it does not limit any possible loss or profit. This mean, if you really focus on getting profits, that you can profit big and fast in a short period of time.

CFDs have no Stamp Duty
Although CFDs are documents you do not have to pay for the stamp duty. This lessens your expenses as CFDs still have fees and the gains are taxed.

CFDs have Low Transaction Costs
Although CFDs have several expense allocations it is substantially cheaper than the rest except for pure Forex trading.

These advantages may cause you to take up CFDs now but it is still best to learn more about this type of trading method. It is popular among experienced investors but it is without risks. You could end up losing your investment if you commit a blunder. Learning how to leverage is essential to help you minimize losses and maximize gains.