CONTRACTS FOR DIFFERENCE 

Some of the Other Things You Need to Know About CFD

CFD’s will usually provide large leverage such as 20 to 1 buying power. This means a trader can use a small amount of capital to take a very large position.

This trading instrument is very easy to understand and is directly tied into the price of the underlying asset.

Lower fees when compared to other stock trading brokerage fees.

Ability to trade both long and short on the market (you can make money whether the market goes up or down).

There is no expiration date when purchasing a CFD. However, there are overnight holding fees.

No need to hold the asset.

The regulations and rules applied to most day traders do not apply equally to CFD traders. There is no need to have 25 thousand dollars held in an account to trade CFD’s.

CFD’s are most suitable for day traders that want a highly leveraged variety of stocks and assets.

The lower transaction fees and no expiration date make for these a very good alternative to stock options or discount brokerages.

The downside is since CFD’s can employ a high degree of leverage, investors can lose money quickly should the price of the stock move in the undesired direction and high leverage magnifies losses when they do occur.

CFD’s provide an excellent alternative for certain types of trades or traders, such as short- and long-term investors, but you must weigh the costs and benefits and proceed according to what works best within your trading plan.

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