The reason why CFD trading is racking up more and more traders nowadays is all thanks to its benefits that are undeniably irresistible. If you are still in doubt if CFDs are for you, here’s a sneak peek at what CFD trading can offer you.
You can still profit from the falling markets
Most of the time, when you trade, you hope that the prices will always go up and never dip because this is your only way to earn some profits. However, if you are dealing with CFD, this will not be your scenario.
Trading CFD allows you to speculate on the market if the prices will go up or fall down. Since you also do not own the underlying asset, you will have the ability to go short or go long. If you decide to go for a short position in CFD, you can sell your contracts and when you want to close the trade, you can just buy the CFD. By doing so, you are getting profited not just when the market prices go up but also when they fall.
Leverage lets you take the most of your trading capital
Leverage is once again, one of the numerous benefits of CFD trading. With the help of the leverage, you get to open more positions because you are only paying a minimal amount to do so. However, you must remember that leverage can backfire if you handle it incorrectly. The best thing you can do to avoid suffering from losses with leverage is to use risk management tools like take profits, stop-loss orders, and guaranteed stops.
Allows to trade forex, indices, shares, and more
When you apply to open a position in CFD, the broker will mostly offer several assets that you can invest in. These assets include Shares, Forex, Stock Indices, Commodities, and Cryptocurrencies. What’s more beneficial is the chance to trade any of this without transferring from one platform to another.
Allows hedging
As mentioned above, CFD can be used to take short positions and you can benefit from the falling markets. That being said, it offsets the risks that you could encounter when trading.
Exempts you from some tax liabilities
In countries like the UK, traders get to have an additional advantage – they pay fewer taxes. Because traders in CFDs do not own the underlying asset, they also do not need to pay the stamp duty for buying and selling in the market. This will save you a bit from your tax obligations at the end of every year. But on some occasions, tax laws could change. It is advisable to ask for legal advice on this matter.
Availability of demo accounts
Demo accounts are the most underrated benefit of CFD trading. There are actually A LOT of CFD traders who find demo accounts not useful at all or are not so confident in using them. But demo accounts are much more useful than how it actually looks.
With demo accounts, you get to trade and test the market risk-free. This is the best place to practice your trading strategy too and backtest it before you use it in the live market.