Advantages of CFDs
Easy to understand and trade
The price of CFDs moves as the actual share price.
For example, if the share of a company ‘X’ is valued $10, a share CFD on company ‘X’ is also $10.
Low commission paid
The fee that a trader pays when trading with a regular stock broker is more expensive than when trading CFDs. CFD charges can be as low as $10 for trades of up to $10.000. If a trade is greater than $10.000, the trader may be charged 0.01% of the total trade amount.
Long and short trades
This is one of the most tempting benefits of CFDs as traders have the ability to select either to trade long and generate profits on an upward market or trade short in a dropping market and still generate profits.
Instruments do not expire
CFDs do not have an expiry date like other derivatives. This benefit allows traders to hold CFDs for as long as or as short as they like.
Trade internationally
Traders have access to the whole world of financial markets, including those in the UK, US, Europe and Asia.
Low margins
When trading CFD’s, traders only need a small percentage of either capital to open bigger or more positions. There are CFDs as low as 1% margin, 3% or 5-10% depending on the share CFD and the provider. Trading on margin can be a very profitable tool if used appropriately.
Dividend payment
When opening long positions, CFD providers pay dividends. With most CFD providers, traders do not have to wait long before their winnings are reflected in their accounts. This makes it even more tempting for the traders.
