Contract for Difference, better known as CFD trading, is the fast growing investment vehicle in the marketplace. CFDs are available for currencies (forex), commodities including metals like gold and silver as well as oil and natural gas, shares, such as Alphabet (Google), eBay, Orange, BT Telecom, from most of the exchanges around the globe as well as the world’s leading indices, including the Dow, the S&P 500, the FTSE, DAX, CAC and the Nikkei, just to name a few. The list is virtually endless. When trading with nsxcoin, you have a huge array to choose from including exotic currency pairs.
A contract for difference (CFD) enables retail and institutional investors to speculate on the underlying market prices of financial assets. As the trader never owns the underlying asset, CFDs are called derivative products and these rely on leverage to enable the trader to speculate on price movements, without needing to put up the full value of the security being traded.
A CFD is essentially an agreement to exchange the difference between the opening price and closing price of the security being traded. The difference, multiplied by the position size, constitutes the profit/loss. Keep in mind, CFD trading is regulated.
CFDs are a leveraged product so you are able to enter a trade with greater exposure than you would if you were to hold the actual stock. Whilst this can result in significantly larger gains if the market moves in your favour, you need to consider that if the market moves against you, it will increase your potential losses accordingly.
One of the prime reasons why CFDs are even traded in the first place, is their considerable scope for price volatility and leverage. In terms of making them popular instruments for traders, the lure of a lucrative prize for successful trading has propelled CFDs from an obscure, seldom-discussed instrument to a mainstream product with which private traders the world over are familiar with.
CFDs are also growing as a result of purely functional reasons. Medium term speculation, particularly in the commodities markets, can be an expensive process, and the volatility of individual assets will seldom be enough to trump the cost-effective, high-yield nature of CFDs. Imagine, for example, a trader looking to take a position in the oil markets over the space of a couple of months. CFDs represent a more tax-efficient, more cost-effective way to enter the market, allowing traders to buy in at a much lower price point, while allowing more significant returns to be generated – a win/win from the trader’s perspective.
To learn more about CFD trading, visit our NSXCOIN education section.
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