Topic: The Virtues of CFD
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Tagged: CFDs trading
CFDs trading is basically a distant cousin of both foreign currency trading and futures trading. It involves trading units of assorted commodities for a virtual price which happens to be considerably lower compared to the actual cost of a certain range of units of almost any commodity. Just for example, let the cost of 10 ounces of essential oil be USD $1,349. A trader can ‘buy’ ten ounces of oil to obtain margin of USD $100. And then for every gain which the asking price of each ounce makes, that would be multiplied with the market price (i.e., the stated position which the trader has undertaken), thereby causing it to be possible for the trader to enjoy a profit. Similarly, whenever the reverse, i.e. a decrease take place, the trader incurs losses, that may transcend the deposit amount (what it often does). However, there are several advantages connected with trading in commodities. The most important advantage is that an individual can benefit from the commodity market no matter what the growth in price tag of units. In case the market is bullish, then you have the ability let the units sit in the fray for long-term, and set a suitably high “take profit” level. Or if, on the opposite, the market place is bearish and it is estimated to see a downturn in prices, then a stop-loss level can be fitted dependent on calculations; following which the units might be short-sold for getting a profit.
Another big benefit of trading CFD is that it (CFD) may be used as a hedging tool to guard against losses that may be suffered by the trader in another market, such as forex or stock. If one loses an enormous sum of money in the forex/stock market, then one can short-sell CFD of exactly that (or even more) amount in an effort to make amends for the loss. Thus, a loss in portfolio value can be prevented.
Like the forex market, the commodity market offers traders the benefit of extended time of trading. Although a commodity market does not remain open for 24 hours, it can reach up to about 22 hours per day. And not to mention when a few markets may be closed, following ever-active indices such as the Wall Street and UK-100 can help traders trade driven by price speculation.
And last but not the very least, the quantity of leverage one gets while trading commodity, is unparalleled in comparison with all other markets. One can enter and secure a trading position for as little as one-hundredth of the particular price of a certain commodity amount. If one had to buy the real, physical equivalent of the commodity in actual life, they would most certainly end up bankrupt. But while trading expensive commodities online, you trade substantial quantities of it at throwaway investment amounts; and reap huge profits in exchange.
The bottom-line is the fact that the CFD trading is like the proverbial “golden egg”. It involves the minimal and returns a great deal.
No matter what financial instruments you are trading, always remember that risk is always there. So better if you plan your trades carefully. When trading CFD, there are various methods that can be developed on how to make your trades better, but there are these 10 fundamental tips that you need to consider.