Monthly Archives: October 2016

Is CFD trading worth it? The Truth Revealed

There have been lots of mixed feelings on the whole issue of CFD trading. Countries like Australia and Britain greatly advocate for the trade as a lucrative venture, but Germany is on the brink of shutting it down completely. So what exactly is CFD trading and why is it receiving so much attention?

Contract for Difference (CFD) is a form of trading where the investor doesn’t own assets but only gambles in their shift in prices. This can be currencies, commodities, bonds, shares, indices, gold, silver or just about anything that can be traded in the stock market. The contract is established between trader and broker to speculate in price movements, in over 10,000 markets globally, and profit from that.

Buy and sell are terms seldom used and at no point will the trader be required to own tangible assets. This stock trading concept was directly borrowed from a gambling style originally used by punters in horseracing. By evaluating its low risks and high gains traits, the stock market quickly caught up and today there are dozens of CFD trading companies like CMC markets.

Advantages of CFD Trading

The major advantage, which we have already mentioned, is the freedom to never own any stocks. It’s a definite stress reliever since you aren’t tied down to one market. All you do is move in and out of markets predicting price movements and making money from it. Any wise investor would give you a go ahead on any opportunity that yields profit minus the risks of asset ownership.

One other thing to appreciate about CFD trading is that you can go at it solo and still excel. Unlike conventional stock trading, there is no need to involve a broker as you can open an account with online CFD companies like CMC markets. Once you sign up, you are required to deposit money to start you off on the CFD trade journey. Here is the best part; you can first trade in dummy account to get acquainted with the craft before investing in real money. Such CFD companies also offer free investor information to guide you on how to speculate on price movements and avoid the loopholes that lead to losses.

Thirdly, you are almost guaranteed a profit when investing in a contract for difference account. If it’s all about price shift predictions, this means there are probability odds just like in real gambling. And where there are odds, there are avenues one can exploit to improve the odds of making an accurate prediction. You also get to decide to go long (invest a large sum) if the odds look favourable, or go short (invest minimal amounts) when you foresee a fall in price. You are able to cushion your losses and diversify your portfolio to reduce the risk of losses.

So why the mixed feelings?

If CFD traders are the envy of conventional stock traders, how come the craft is not popularised globally? A country like Germany has established an act that controls all forms of gambling, and CFD trading is included in the list. They will control how much leverage a trader has, screen all CFD broker activity and introduce trade airbags that prevent German investors from losing all the money in their account in the event of a loss. That’s not all; any sign of a scandal or misconduct that occurs anytime from when this act was implemented will lead to an automatic disqualification of CFDs in Germany for good.

Backing Germany’s decision is Belgium who also put an end leverage Forex and binary options trading. CFD trading is banned in Japan and the USA as well, and more countries keep joining this quest of censorship. Nonetheless, countries like Britain and Australia continue to offer the CFDs and even encourage it as a side venture.

Why the mixed feelings you would ask? Perhaps it’s because no one ever mentions the risks involved in CFD trading. Yes, there are blogs, articles and financial website that mention some downfalls but few get to mention the magnitude. Because the craft resembles gambling, one has the potential of losing everything invested instantly.

Moreover, CFD has its addictive side and many investors have burned out from blind uncontrolled speculations. Thus, some countries see the usefulness of controlling the trade with the consumer’s welfare in mind.

CFD trading is a highly profitable venture when executed wisely and with control. Countries like Germany are already exercising control on behalf of the citizens while the USA does away with the concept completely. But you can still access the trade in Britain and several other Anglo countries.