Stocks and CFD on stocks trading

Stocks are considered to be unique financial instruments allowing to become a part of the global financial system and increase your personal profit. Trading real stocks is a fascinating but an expensive activity. In the early 1990s, English financiers John Wood and Brian Killian invented a derivative financial instrument CFD (contract for difference) for those, who loved to make money on the purchase and sale of stocks. Stock CFD trading is practically accessible to everyone, as it allows with a minimum amount of funds to carry out multiple transactions on the purchase and sale of stocks of the world’s leading companies.

Stocks and CFD on stocks

A stock is a security allowing its owner to receive part of the profits of the joint-stock company in the form of dividends and participate in the management of that company. Stocks can be common and preferred, that is to say with or without the right to vote at the general meeting of shareholders. In addition, the owner of the preferred stock receives a fixed dividend and has a prior claim on part of the profits of the company in case it liquidates. Stock trading can generate high profits, but only not by sitting and waiting for dividends.

Traders’ main income is generated from the purchase and sale of stocks in the secondary market. If the volume of your investments is small, stock trading, as a rule, is not as highly profitable as currency trading, because there is no or a very small leverage in case of trading in the stock market. For the same reason, the risk of losses in case of trading stocks is much lower than in case of trading in the Forex market.

CFD on Stocks is considered to be a derivative financial instrument through which traders can make money on the price fluctuations of stocks without owning those stocks. At the end of the contract, if the price of the stock has increased, the seller pays to the buyer the difference between the opening price of the stock and its current value, and if the price has decreased, the buyer pays to the seller the difference.

Stock CFD trading has many similarities with the classic trading in the stock market, however, there are a number of differences between them:

• When buying stocks, an investor becomes a real co-owner of the company and receives dividends:
• Stock trading through CFDs allows to generate profit both from the rising and falling markets of these stocks;
• Due to the mechanism of margin trading, traders can enter CFD market even with little initial capital. The usage of leverage allows to make high profits from small price changes of stocks.

Stock CFD trading is one of the most efficient and interesting ways of investment, only if you take the choice of a broker responsibly. So, try to make the right decision.