Hi there, if you are reading this article I believe that you are either a current or a neophyte trader who wishes to be or is currently involved in CFD trading. Prior to our discussion on the advantages of CFDs in the market, allow us to take you back to the reasons why people have their eyes fixed on trading and what is its connection to our trading instrument.
History of the trading process
In the ancient days, it was natural for people to exchange the things they have with the ones that they do not own. This process was called bartering. As soon as bartering became famous all around the world, traders realized that it was better to hand in a particular amount to serve as a payment for a service or commodity. Thus, the concept of buying and selling took over the society. This is what trading is all about nowadays, we use cash to get what we want. People from all around the world have realized the advantage of trading and this has proven that money and trading is definitely a process which is as important as breathing.
Connection of the traditional trading to CFDs
The era of digital technology created derivatives that allow us to trade to the comfort of our homes through the internet. The usual desire to acquire cash in order to get the things that we wish for is still present and this has become one of the reasons why certain people pick CFD Trading as an avenue for their quest to financial freedom.
Now that we have determined the primary goal of traders, we are all set to dig deeper into CFDs. We give you the 3 reasons why dealing with this instrument should be included in your portfolio.
1.Higher leverage compared to other instruments
CFDs allow you to deposit a small amount with a broker who can lend you more than what you deposited and use this as an advantage to get a bigger amount in the market. The advantage however comes in as an opportunity for a small time trader to be involved with trading even without having a very huge amount of money on hand.
2. Allows short selling
Take note that not all financial instruments allow short selling. Thus,you are just lucky for choosing to deal with CFDs because you are given the freedom to short sell minus the rules,restrictions and on top of that additional expenses for borrowing.
3. Opportunity for traders to experience handling diverse accounts.
Every trader’s portfolio matters because it serves as a reflection of their trading abilities. If a trader has dealt with several types of financial instruments, brokers or other traders would trust him. CFD can give you this opportunity because the instrument has a range of more than 17,000 assets( in the form of commodities, indices, forex, stocks and even cryptocurrencies)to trade with.
There are actually more than the above listed 3 Reasons why traders pick CFDs as their trading instrument but we have picked the most basic reason for doing so. CFD expiry dates, hedging and lower or absence of minimums are also some of the promising features of CFDs but we have reserved the discussion of these features to more advanced CFD reading material. You also need to be reminded of the fact CFD Trading is not actually a bed of roses. It also has risks that come along these advantages. That’s also the reason why CFD Risk Management Lessons are part of CFD Trading Courses.