CFDs Futures Trading: Why Invest in the Stock Exchange
Many people today are choosing to invest online in the stock exchanges around the world. One term that keeps coming up is that of the Contract for Difference or CFD. The reason why many people have not heard of it is because in the US it is against the law and considered to be a form of short-selling. However, in many indices around the globe, the Contract for Difference is a perfectly legitimate means of making money in the stock market.
The concept of a CFD or Contract for Difference is that a contract is agreed upon in which the seller of a share of stock will pay the difference between the stock's current value, and it's assessed value at the completion of the contract. However, when the value goes the opposite way, then the buyer has to pay the difference between the prices.
It is basically a speculative kind of trading. The investor is able to speculate as to the value of the share of stock and as such benefits financial through their speculation. In reality, one never really owns the share of stock, but rather makes their profit solely through the speculation alone.
One can choose to go for the short position or the long position in using CFD's. They can also be done on an index level similar to that of a future, only that the Contract for Difference does not have any expiration date. It will remain open until the buyer closes the contract. Once the contract has been closed, the deal is done unless there is a loss in value for which the buyer has to pay.
You may even be able to use a margin in trading Contracts for Difference. These margins which range from 1% to 30% allow you to make the most profit possible with a particular trade. However, because of this, the margins can easily multiply any losses as well.
On some Indexes, the CFD's are even listed on the index. In Australia, there are a number of Contracts for difference listed on their exchange. However, in some countries they are not listed, but are still available to investors who would like to make use of them.
There is a significant amount of risk involved with trading CFD's. Should the share not go as one speculates them too, then the losses can be great. These losses can be even further multiplied when one chooses to trade using margins. Most of all though, Contracts for Difference are best used only when the market is in a stable position in order to minimize potential risks. In the end though, you have to keep in mind that you should never invest any more then you are absolutely willing to loose should a trade o belly up. - 23217
The concept of a CFD or Contract for Difference is that a contract is agreed upon in which the seller of a share of stock will pay the difference between the stock's current value, and it's assessed value at the completion of the contract. However, when the value goes the opposite way, then the buyer has to pay the difference between the prices.
It is basically a speculative kind of trading. The investor is able to speculate as to the value of the share of stock and as such benefits financial through their speculation. In reality, one never really owns the share of stock, but rather makes their profit solely through the speculation alone.
One can choose to go for the short position or the long position in using CFD's. They can also be done on an index level similar to that of a future, only that the Contract for Difference does not have any expiration date. It will remain open until the buyer closes the contract. Once the contract has been closed, the deal is done unless there is a loss in value for which the buyer has to pay.
You may even be able to use a margin in trading Contracts for Difference. These margins which range from 1% to 30% allow you to make the most profit possible with a particular trade. However, because of this, the margins can easily multiply any losses as well.
On some Indexes, the CFD's are even listed on the index. In Australia, there are a number of Contracts for difference listed on their exchange. However, in some countries they are not listed, but are still available to investors who would like to make use of them.
There is a significant amount of risk involved with trading CFD's. Should the share not go as one speculates them too, then the losses can be great. These losses can be even further multiplied when one chooses to trade using margins. Most of all though, Contracts for Difference are best used only when the market is in a stable position in order to minimize potential risks. In the end though, you have to keep in mind that you should never invest any more then you are absolutely willing to loose should a trade o belly up. - 23217
posted by X - Men @ 5:18 AM
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