If you know about trading in the financial markets, you will have an overall idea of the process involving buying and selling some instruments like stocks, indices, and commodities. You will gain profits from the rise in the price of these instruments and will lose your investment if the price falls. However, the process of cfd trading South Africa will be different. Here, you will trade contracts. These contracts will have an opening date and closing date with an agreement on a future price of a particular instrument. It could be a stock or a commodity. If the price mentioned in the contract is met at the closing date of the contract, you will gain a profit. However, any deviations will get you losses. You need not buy the instrument directly as you would do in other markets. CFD trading offers some attractive beneficial factors. It is better to know these before starting your trading activities. Let us discuss a few of them.
What could be the beneficial factors of CFD trading?
Gain at dips
If the financial markets are dull, the prices of all the instruments will fall. Let us assume that you have 1000 shares of a company that has been affected by the market’s price correction. So, you will be at a loss until the price goes up. You cannot do anything else apart from waiting for the pricing to increase. However, CFD will allow you to even get profits from the falls in the market. To do so, you should have sold your contracts for the shares that you predict will fall short. The option of going short on the instruments that are foreshadowing losses gives an advantage to the traders in the CFD market alone.
Leverage and margin
Similar to the forex market, you can use the leverage option in CFD trading also. Leverage is nothing but an ability to go long for an instrument even without having the money in your account. All you should do is to pay a small margin to the broker and the remaining amount will come from the broker’s end itself. The advantage of using leverage is the ability to get higher profits with lower investments. The disadvantage of overusing the leverage option is the higher losses also as you are responsible for the entire amount and not only the margin. However, the leverage option is beneficial most of the time.
Exposure to all trading instruments
Another beneficial factor of trading in CFDs is the exposure to all trading instruments as listed below.
Stocks – stocks and shares of companies.
Commodities – commodities like gold, silver, zinc, etc.
Forex – currency pairs like USD/GBP, etc.
Crypto – cryptocurrencies like bitcoin, Ethereum, etc.
Stock indices – stock indices from a range of exchanges.
You need not switch to other platforms to buy the contracts from these various markets. All will be accessible from one website itself. Also, you can have a CFD contract of all asset classes at once.