Why Should You Trade in CFD?

CFD or contract For Difference is a trade where you can win or lose based on the difference in prices. The person who invests in CFD does not really own the asset but only bets on the direction in which the price will swing and the amount to which the price will move. Here are some reasons why you should consider CFD trading.

- High leverage – Since you do not have to purchase the stock itself and only bet on it, the margin required is as low as 5 per cent. This means that the leverage on the investment that you make can be as high as 20 times. However, it is also important to remember that the leverage can work both ways and you stand to lose a similar amount of money if you lose.
- Absence of an expiry date – A CFD does not deteriorate in value and does not have an expiry date like options. However, there are fees that need to be paid if the CFD is held for more than a day.
- Dividends – Some people believe that dividends are paid to only those who own the assets. However, in the case of a CFD, you can get dividends even when you do not own the asset.
- Easy – the concept of a CFD is easy to understand for all. One does not need to be a great player in the stock market to be able to evaluate various options to invest.

One of the main attractions of a CFD is that you do not need to hold the asset and therefore you do not need large sums of money.