CFD trading has increased in popularity in the recent years and is now available for all (where permitted by local regulations).
Contracts for difference (CFDs), allow individual investors to trade in a broad range of financial products such as indices and commodities without having to own them physically. CFDs reflect the price movements of commonly traded products, usually of future contracts, and allow individual investors to use standard trading tools, such as the well-known technical analysis, fundamental analysis, and strategies to capitalize possible market trends.
Similar to Forex, CFDs have become a popular form of investment because they allow the use of leverage. It means a small investment can maximize your purchasing power by up to 50 times while only risking your initial investment.
Advantages of CFD trading
- You get access to a variety of known stock indices and commodities without having to buy physically.
- Maximize the potential of your portfolio by using leverage on Indices and assets to 1:50 (where permitted by local regulations).
- Cut down the costs of your portfolio by trading indices and commission free commodities.
Contracts and commodity indexes are expiring based on underlying futures contracts. Because the CFD price is based on the underlying asset price, the best hours of maximum operating tend to be typically the hours when the exchange for the underlying asset is open. Therefore, contracts based in the US tend to receive an increased volume around the US business hours.
Recently, oil trading has become a popular financial investment, allowing retailers to benefit from the fast-paced movements of the commodity or hedge against currency depreciation. In the past, oil trading was only available to large financial institutions such as central banks, hedge funds, and high net-worth individuals. With the development of Internet, more and more small investors are taking advantage of the daily fluctuations and the opportunities for trading oil.
There are many types of oil markers, but brokers usually offer the possibility to trade the well-known Texas Light Sweet Crude Oil (or WTI-West Texas Intermediate). WTI plays an important role when it comes to risk management in the energy sector since it has the largest trading liquidity, volume, and transparency. (Source: http://www.ads-securities.co.uk/cfd-trading/). The price of WTI is often referenced in the news reports and reflected in oil prices such as Brent crude prices (originating in the North Sea). Oil trade, which includes WTI as well as other types, offers traders a dynamic method of trading commodities online.
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Oil trade advantages:
- Brokers usually allow traders to build a portfolio of multiple products into a single account-add oil trading to foreign exchange or other commodities for an ideal investment mix.
- Certain currencies, commodities, and indices may have a correlation with oil, which can also provide traders with useful information to help with their business operations.
- Oil prices are volatile, changing on a daily basis, which provides traders the opportunity to take advantage of significant price changes.
Trading in the S & P 500 Index (SNP / USD)
In addition to FOREX and commodity trading, you can also take advantage of S & P 500 CFD.
The S & P 500 index follows the common stocks of top 500 largest companies that are listed on the New York Stock Exchange or the NASDAQ. Since it focuses primarily on US-based companies, many believe the S & P 500 provides a clear indication of where the US economy currently is and where it leads in the future.
Advantages of trade with S & P 500 using a CFD
- Expose your portfolio to the US market by trading a market leading index in the form of a CFD (where permitted by local regulations).
- Maximize your purchasing power by using a customized leverage of up to 1:50 (where permitted by local regulations).
- Cut the cost of your portfolio based on trade indices and commission free commodities.
- Use advanced trading strategies such as short selling or hedging to capitalize on all market directions.
Trading in the NASDAQ-100 Index (NDQ / USD)
The range of CFDs that brokers offer continued to increase over the years. NASDAQ-100 is another option. As a perfect complement to other CFDs, FOREX, and tradable commodities, the NASDAQ-100 ensures that you, the investor, have access to the most attractive commercial possibilities. You can benefit from its movements using a leverage of up to 50, which allows you to trade the NASDAQ index for an amount that is up to 50 times your initial investment.
NASDAQ-100 lists the top 100 largest non-financial companies in the US and around the world. The NASDAQ-100 Index is one of the most respected stock market indices, standing apart from many other indices due to the high-standard accession criteria to the list.
Advantages of trade with NASDAQ-100 using a CFD
- Diversify your portfolio by having numerous options in a single trading account. Brokers allow you to trade FOREX, commodities and indices such as the NASDAQ-100, with the click of a mouse (where permitted by local regulations).
- NASDAQ-100 CFD mirrors the price movement of the underlying assets, allowing you to take advantage of trends in NASDAQ while not physically own the assets.
- Maximize your earning potential by using customized leverage to 1:50.
The following infographic provides you with more information on CFD trading in a scenario where two people each open a CFD contract to speculate on the price of oil.