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Reasons Regarding Why One Should Trade through CFD

Discussion in 'Forex Discussions' started by adamsmiths, May 31, 2016.

  1. adamsmiths

    adamsmiths New Member

    Mar 22, 2016
    Likes Received:
    CFD trading on the surface would sound a lot like stock trading and foreign exchange trading. Trying to define it, one can say that it involves trading or exchanging the units of various commodities on a huge margin. That is, they get to trade the spreads at a price which is way lesser than the actual price of a specific number of commodity units. Sample this: Suppose the actual, real-world price of 10 ounces of crude petroleum is $1,349. A trader is able to ‘purchase’ those ten ounces at a whopping margin of $100. For every single profit that the unit’s price is able to garner, it can be multiplied with the real price of the product (i.e., the market position assumed by the trader), thereby enabling the trader to make a profit. Similarly, when the opposite development happens, the trader would incur significant losses, which can very well go beyond the amount of deposit. However, CFD trading entails a lot of benefits. The foremost advantage is that one can earn profits from the commodity market, irrespective of how much the commodity units increases. In case there is a market which is bullish, then one can let the units germinate in the market for a long time, and set a high level for the “take profit” limit. However, if the market is bearish and a down turn in prices occurs, then a stop-loss level can be determined following calculations, after which there can be no short-selling.

    Another huge use of trading the CFD is that the CFD could be used to engage in hedging, which would help a trader to offset all the losses incurred in commodities trading. If a person loses a lot in the forex trading market, then CFD of exactly that (or more) amount could be short-sold in order to make up for that loss. And by doing that, a portfolio value depreciation can be prevented.

    Much in the manner of earning forex bonuses in the forex market, there is the benefit of extended trading time in the commodities market. Though a commodity market does not really remain open for twenty-four hours, it would be possible to leverage up to 22 hours in one day. And even if a few specific markets are closed, ever-active indices like the UK-100 can help traders conduct trade based on the price speculation.

    And lastly, the amount of leverage one would get while trading in commodities is far superior when compared to all other kinds of virtual trade markets. One can assume a trading position for as little as one-thirtieth of the real world price of a certain commodity amount. However, if someone wants to purchase the physical equivalent of that commodity in real life, they would most likely end up as bankrupt. But while one is engaged in trading expensive commodities online, one gets to trade in substantial quantities of it at throwaway amounts of investment; and they reap big profits.

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