Your endeavor in CFD stock trading starts by choosing the right Forex broker as your trading partner. You have to make sure that your Forex broker offers not only the best deals in the stock prices but also lower costs and higher leverage.
While it may be true that joining the stock market using CFDs does not give you the ownership of the shares, you will gain the following benefits:
👍 1. Lower Capital
Conventional stock trading requires you to have a higher amount of capital to start trading. However, with CFDs, you can start trading with capital as low as 100 USD, depending on the broker’s account policy.
👍 2. Lower Costs
The costs of the CFD trading system are much lower than conventional stock trading. Generally, you just need to pay the difference of the market price and the broker price, which is usually included in the spread. Some brokers also charge commissions, however, the amount is usually lower than that of stockbrokers.
👍 3. Leveraged Trading
By joining the CFD stock trading, you can benefit from the leverage offered by most brokers. It means that you can trade in a much higher amount than your initial capital, resulting in higher profits than conventional stock trading. It is commonly offered at an average of 1:20 or a 5% margin of the whole traded amount. It means that with only 50 USD, you can open a trading position up to 1,000 USD.
Please note that leveraged trading may result in higher risk. That is because while the profits are offered at a higher percentage, the same numbers will also apply if your trading endeavors result in a loss.
👍 4. International Market from One Account
In CFD stock trading, you just need to register for one account with the broker of your choice, and then you will be able to access various stocks from different countries in the stock market as long as they are available in your broker’s list. You can trade stocks with American companies in USD or with British companies in GBP all from one account and one trading platform.
👍 5. Go Long or Short Anytime
Unlike conventional stock trading, you do not have to buy a bunch of expensive shares to start trading via CFD systems. You can open your trade with a long/short position depending on your speculation on the market price, and close the trade anytime you want to since CFD trading hours are more flexible.
Nevertheless, maintaining your position overnight will still cost you a fee depending on the broker’s policy.
👍 6. Take Profits Regardless of Trend
Conventional stock trading applies the old rule of buy low/sell high since you need to trade the assets first so you can sell them later. Therefore, when the market price decreases, you will be at a loss.
Yet with Forex Stock trading, you can still make profits even when the market price is decreasing as long as you have formulated the right strategies and made the right predictions since you can start your trades with a long/short position.