Contracts for Difference are instruments you can trade that reflect the movements of assets underlying it. While allowing for losses or profits to be realized when underlying assets move with regards to positions taken, Contracts for Difference do not let the actual underlying asset be owned. In the simplest of terms, they are contracts between brokers and clients. There are several advantages to using Contracts of Difference but how successful you get also depends on getting the right CFD trading provider.
Some of the advantages of Contracts for Difference include:
* Higher leverage – compared to traditional trading, Contracts for Difference offer a much higher leverage, usually beginning at 2% of the margin requirement. And depending on the assets, this number can rise up to 20%. Lower margins mean less capital outlays for investors and traders and greater potential returns.
* This does no’t follow along, allowing for instruments to be shorted any time you want. Since no one actually owns the underlying asset, there are no shorting or borrowing costs to be levied.
* One platform for global market access – most brokers for this derivative offers products in major markets in the world. As such, it would be very easy to trade within any market for as long as that market is accessible from a broker’s platform.
* Professional services without fees – brokers essentially are the same with traditional trading brokers but most traders do not charge fees for trading CFD. For brokers that offer guaranteed stops, fees for the service are usually attained separately.
* No day trading requirements – other markets require that certain amounts of capital be met in order for day trade to happen. The market for Contracts for Difference are not bound by these restrictions, with accounts often opened with as little as $1000. The usual amounts though are between $2000 and $5000.
Interested in Contracts for Difference?
Then you need a broker. You can easily get a broker by going online, with many sites available letting you compare various brokers in the area. Choose well so that you can get the most out of your efforts at taking advantage of the benefits. Look for brokers that are credible and have wide-ranging resources. Look for the lowest opening balances required. Look for certifications to ensure that the broker is operating legitimately. There’s nothing like throwing away your investments on a fraudulent broker.