Don't you just hate it when you have to wait for the prices of stocks and cryptocurrencies to rally so you can sell? Or, for the prices to dip so you can buy?
With CFD, however, you can profit from both the rise and fall of the price movements, as long as your speculations are correct.
Are you excited to explore this profit-generating option?
Before you venture into this side of the financial market, equip yourself with a deeper understanding of CFD for a higher probability of success.
What is CFD?
Contract for Differences or CFD is a financial derivative where a buyer and seller enters into a contract or arrangement, stipulating that a buyer pays the difference of an asset's value from when the contract opened and closed.
When you trade CFD, you buy an asset from a broker but don't physically own the asset. What you do is speculate on the price movement.
For example, you buy 100 CFD stocks of company XYZ at $100, thinking that the price will appreciate. When you close a trade at $150 per share, you make a profit of $50 per share.
Of course, if your speculation turns out wrong, you're going to incur some losses too.
What makes CFD a more flexible trading instrument?
1. Leverage
CFD is a leveraged financial trading product that allows you to trade on margin. This means you can open a larger position with smaller upfront investment.
For example, your broker offers a 10% margin on XYZ CFD. If you want to trade 100 CFD at $100 per CFD, you only need to pay 10% of the total amount of the trade, which is $1,000 instead of $10,000.
This allows you to use your trading capital more efficiently. It is also one way for your broker to help you make the most of your funds.
2. Profit from both rising and falling markets
Unlike other financial assets, CFD allows you to go long (buy) or short (sell), depending on whether the prices take an uptrend or downtrend direction. This gives you more opportunities to profit than if you’re limited to trading in a bullish market.
For example, if you think that shares of XYZ will fall in price, you can open a position that will allow you to profit as the underlying market price decreases.
3. Lower transaction cost
Due to the leverage effect, your initial outlay for opening a CFD trade is lower compared to when you buy stocks or cryptos outright. Also, most brokers impose lower fees when trading CFD.
4. Faster execution and processing
Take cryptocurrencies, for instance. Trading normally, you'll have to buy the actual digital currency, which can take time to process and fill. In such a volatile market, there's a likelihood that your order might not be filled at the price that you want.
You can sidestep such concerns when trading crypto CFD. In fact, you can expect instant fills. Cryptocurrency CFD trading comes with other benefits as well, such as increased liquidity and no digital wallet required.
5. Variety of trading products
CFD trading gives you access to a range of financial instruments. It can be traded on various financial markets:
- Cryptocurrencies
- Energy and commodities
- Forex
- Indices
- Shares
As the popularity of CFD trading grows, the choices of instruments will also increase.
Trade CFD with Fullerton Markets
We offer different CFD assets across different financial markets, including stocks and crypto CFD. You can access multiple assets in one place, increasing your opportunities to profit from the markets.
With our robust trading platform, expect a faster execution time when you open and close a trade. Your fund security is also guaranteed.
Now that you know why CFD trading is popular among traders, start building a future with it. Who knows? This could be the catalyst you need to fuel financial growth.
Ready to grow your wealth in the world's largest financial market and enjoy unlimited bonuses at the same time? No better place to start than right here with us! Start trading with Fullerton Markets today by opening an account:
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