Investing in CFDs: A Basic Guide

Trading and Investing in the 21st Century

The digital age has already transformed the trading and investment sector. Technology - in particular smartphone apps - have rewritten the rules and allowed people to have improved access to brokers. This has helped open the doors of trading and investing to new demographics. Trading is now faster and more transparent than ever before - allowing buyers to be more informed about their trading options. It has also given greater prominence and improved accessibility to many trading options.

CFD (Contract for Difference) trading is an example of an investment option that has benefitted from improvements in technology and is becoming increasingly popular as a result. But what exactly is is?

CFD Trading

• CFD (Contract for Difference) trading allows investors to speculate on the direction of a particular trading option.

• Selecting an upward or downward future movement on their trading option, investors select the number of CFDs they would like to trade on that basis; returns are made if you correctly predict the direction of the market.

• Whereas people often invest in various options over the medium to long term, CFDs offer the potential for fast - almost instantaneous returns.

• CFD trading gives buyers access to a whole host of different markets - shares, commodities, indices, forex and treasuries are all examples of the different options available.

• Apps have allowed CFDs to be traded in real time, with greater transparency and access to information.

The Benefits of CFD Trading

• Speed - Many CFD traders enjoy the ‘fast’ and ‘reactive’ nature of the investment; the nature of this form of trading means that trading arenas have to display changes to ‘real time’.

• Protection - CFD trading offers users the option to mitigate the risk of trading by setting an arbitrary point at which your CFD trade will be closed, giving you peace of mind.

• Tax Free (UK) - Whereas many investment options such as stocks and shares are taxed on selling, CFD trading is tax free in the UK because the trader does not actually own any assets.

How to Trade CFD?

It is now extremely easy to trade CFDs. You can open an account in a matter of seconds and start trading instantly.

What Else Do I Need to Know?

It is important to recognise that - as with any form of investment or trading - CFDs are not free from risk, and you could lose your original investment. When trading, it is important to consider how much money you would be prepared to lose in the process. Ensure you are well-informed and fully understand the trading process; you can easily pick up trading tips and advice online.

Have you considered trading CFDs?

This article does not necessarily reflect the opinions of the editors or management of EconoTimes