Stock market has always interested the investors from across the world. The basic understanding of stock market is that you will earn money, only when the value of the instrument that you purchase goes up. That is one of the reasons why most of the stock traders play it safe, by going for the long trades.
Contracts for Difference:
Now, CFD in stock trading allows you to make money even if the prices go down. Contracts for Difference trading is attracting a lot of retail traders, because it allows them to benefit from the small price variations, taking place in the stock market.
CFD is basically the agreement between the Retail Investors and the brokers, and the contract gets terminated immediately upon reaching the pre-fixed expiry period.
The biggest attraction of CFD trading is that it allows you with the opportunity to earn money, regardless of increasing or decreasing prices. All you will need to do is predict the right direction or the touch-point price, before lapsing of the contract period.
How do you make profits?
Very much like most of the online trading types, CFD trading also works on leverages. What it means is that you stand to earn much more, than the amount that you will have to deposit for that trade. Please be reminded that you could also lose more than your deposit amount, if the prices go against your prediction.
The brokers also offer CFD trading on various assets like stocks, Forex currency exchange, commodities, gold, silver, oil, etc. There are hundreds of different tradable assets that allow you to earn profits with CFD trading. You can also trade on hundreds of assets from different international markets – European market, UK market, U.S. market, and Asian market.
It does not matter if the markets are falling or rising:
If your technical and fundamental analysis of market suggests that the pricing of a particular instrument is going to fall, then CFD trading will give you the window of opportunity for benefiting from that fall in price.
Of course, if the prices continue to climb up, then you will be losing money on that trade. CFD is an ideal tool for hedging the falling markets, so that the overall value of your portfolio can be maintained, even when the prices of your stocks are going down.
Investment leverage potentials:
If you are a looking for investment options with lower capital amount, then CFD trading can be the best option for your requirements. You can place trades bigger trading amounts, by investing about 10% to 20%.
As you can see that leverages allow you to magnify your returns, but they can also magnify your losses if the trade goes against your prediction.
Access to markets from around the globe:
CFD trading can be conducted from anywhere across the globe, provided that you have a computer with Internet connection. You can invest on the price movements at Wall Street or Singapore, from the comforts of your own homes or offices. CFD markets allowed you to earn money with shares, index, currencies, metals, and various other financial sectors.