A CFD, in general, is a type of derivative product traded to acquire the ability to speculate on or hedge on the rising or falling prices of equity indices and commodities without actually owning the underlying instrument. It is an agreement that binds two parties to exchange the difference between the opening price and closing price of a contract. Since traders do not own the asset, they are not required to pay associated cost of ownership including commissions, account fees and
What is Actualy Trading Definition
Trading has really become broad in coverage. In recent time, you have a plenty of choices to trade in the market with each option varying in features and characteristics. Aside from the usual stocks, currency pairs, the market has also this unique ‘contract for differences’, CFD for many, which could be a good source of income for profit-seekers.
Advantages of CFD
CFD trading offers various benefits that are not present to other instruments available in the market.
One notable gain from this type of trading is higher leverage. The leverage in CFD trading offers traders to enter the market using funds that are only a fraction of its actual value. CFD market, unlike traditional one, has standard leverage of as low as 2 and as high as 20% margin requirement.
Although it looks similar to traditional one, CFD trading also benefits from both rising and falling markets. Investors have the option of buying a specific CFD in a bullish market and selling it in a bearish market to achieve profit.
Lastly, CFDs have no fixed lot size and as abovementioned it has no underlying ownership. It allows users to have flexible order sizes that give them greater control in their trade position and their portfolio without owning those underlying equity.