Amazon. Apple. Intel. Google. Coca-Cola. Five of the world’s most successful companies. And don’t we all deserve a piece of the profits? Of course we do! But the days of buying stocks at full market price and paying high commissions for the privilege are long gone. Exit buying stocks, enter CFD stock trading. Read on to learn why we think CFDs (contract for difference) are a great way to make money online.
Remember the saying “dummies buy stocks but investors trade CFDs”? Probably not, as we just made that one up now. But that basically sums it up in a nutshell.
Ever growing in popularity, CFD trading allows you to take part in the success of the world’s leading companies and simply speculate on the movement of their stocks, including Wall Street’s biggest stocks like Apple, Alibaba or Facebook. Trading stock CFDs is simple (a click to buy, a click to sell), quick and accessible, removing the need for buying or selling physical shares through stockbrokers.
The main advantages of trading stock CFDs
Profit in both bull and bear markets
Every investor is familiar with the basic mechanism of making money by buying (or ‘going long’) company shares then selling them back on the stock market at a higher price. But with stock CFDs, going short is as easy as going long. For example- sometimes we come across a company and we know that the price is reaching a peak. With conventional stock trading, the average joe doesn’t have the option to ‘short sell’ (profit from a fall in a stock price) unless using a full-service broker. And the fees are usually ridiculously expensive. Trading stock CFDs allow anyone the flexibility to short thousands of various Wall Street stocks and profit on the fall when they believe a stock’s price is headed down.
Using leverage to boost your account
Leverage is considered by many stock traders the primary benefit of trading CFDs, enabling you to make a large profit from relatively small movements in the stock price. How? By allowing you to invest a much larger amount than you could with a traditional stock broker. For example, established brokers can offer leverage of up to 20:1 or even 40:1. If you were to deposit a sum of $10,000 in your trading account, 20:1 leverage will allow you to execute trades worth $200,000. A word of warning: leverage is a blessing to experienced traders, but can be dangerous for new traders. So, if you want to begin trading, but are worried about the leverage aspect, then a word of advice- trade at zero levels of leverage. The main benefit of doing this is that you will have the ability to easily short sell when markets are falling.
No commission, no fees, low spreads
Buy/hold/sell fees? None. Full service broker commissions? None again. When trading stock CFDs, the cost of trading is already included in the dealing spread. Do note that when you trade a stock with leverage or short a stock, the trade may be subject to a small overnight fee called a “rollover fee”.
Also, when trading CFDs with a reputable online broker you should never be charged for the following:
- Access to real-time market prices
- Full-featured, easy-to-use trading platform
- Basic and advanced trading tools
- Education and tutoring
- Mobile trading apps
Access to dividends
CFD stock traders are entitled to company dividends just as regular stock holders. Provided you are in the CFD position prior to the dividend issue date, if you own the stock on a long position, you will receive a credit equal to the amount of the company’s distributed dividend.
Total control over your risk
When it comes to risk management, once again, CFDs are the clear winner. Trading stocks through CFDs allows you to minimize the risks with various risk management features such as a ‘stop-loss’, in order to limit any unwanted loses. A stop loss is an automated instruction to exit a position so you never lose more than you can afford. If these are set at appropriate levels, any potential losses should be sustainable. Obviously, if you go long (buy) into a market your stop-loss would be set below your open price and if you were to short the market (sell), the stop would be above the open price.
With no constraints of time, level of experience or even budget, there’s no better investment today than CFD stock trading.
Trading stocks through CFDs offers a flexible alternative to traditional investing and is therefore an attractive instrument for a wide variety of traders. New investors can trade CFDs successfully, but you should gain a thorough understanding of the benefits and risks before trading. That said, with the right training, traders can take full advantage of the many advantages that CFDs offer while limiting the potential downsides. In any case, we’ll say it again- whether you prefer trading full or part time, the advantages of CFD stock trading, enticed by the prospect of huge returns, are simply too good to ignore. We urge you to contact any reputable online broker to hear more.