What are CFDs?
CFDs are the contracts for difference. They are the financial instruments which are very popular and in trend these days. CFDs are actually the agreements undertaken between the two parties i.e. trader and the broker. The agreement is about the movement of the price in any asset in future. In this a trader researches thoroughly about the company’s growth and the rate at which it is performing. Then he buys the CFDs at the current rates if he speculates that it will be going to rise in the near future. And when the price rises, then he settle at the difference of the opening and the closing balances.
Benefits of CFDs
CFDs offer a lot of benefits to its traders. They have been discussed here:-
- Margin-CFDs are always traded on the transaction based on margins. In which trader borrows the amount to enlarge their positions.
- Taxation- on the share transaction a person is bound to pay high amount of stamp duty, but CFDs are something which is free from the duties or taxes because there is no original share transaction happening.
- Flexible instrument- unlike shares and other financial instruments, CFDs are much more flexible as one can speculate that will going to rise or fall in the near future. And accordingly takes the action.
- Cost affective- when you compare CFDs with the other financial instruments, they are seemed to cost less. As it does not include any taxes. The fee that the CFD broker charges is comparatively less than the share brokers.
- Expiry date- they are less risky as there is no expiry of date. You can hold on to the CFDs for as long period as you want. When you speculate that you will be gaining at the particular point of time, then you can settle these.
CFD brokers
CFD brokers are the most important aspect when you are trading with CFDs. It is very difficult to find the best brokers. If you think that all brokers are same and reliable then it is not so. Let us compare-
- Capital CFDs- it is one of the top CFD account. They charge you less. Avails you with the spreads which are competitive. It provides a low margin to the trader with high amount of profitability.
- IG-it is also a top CFD account and leading the market. It gives the best and the advanced DMA access for the holders of equities.
- City index- it is that account which provides you with the current updates and the news, research of all the traders of CFDs. It has some special commission rates for the account holders who are new.
CFDs involve less risk and are very speculative. One can directly compares it with the spread betting in which you don’t have to actually become the owner of the shares. You can just speculate the prices and when you feel that the prices are going to be high in future, and then you should settle it down.
