Why do people prefer trading stocks through CFDs?

Instruments traded online vary from currencies to metals, indices, stocks and many more. The choice depends on trader’s preferences. The history of stocks goes back to 1500s, Belgium, where the first stock exchange appeared. Surely it was nothing to do with the Stock Exchanges that we do know now. At those times brokers and moneylenders met for business, government and even individual debt issues.

Real stock exchanges were formed quite later. In 1698 London Stock Exchange was formed and in 1792 - New York Stock Exchange. Surely, the times were different and people could not trade stocks in a way they do it now. However, the point is that interest towards these instruments has quite long history. Individuals were eager to own shares of companies and make profit through dividends. Thus, this has always been a good investment.

Why trade stocks through CFDs?

The emergence of CFDs (contract for differences) made stock trading even more appealing and gave it a new lease of life. A contract for difference or a CFD, as it is mostly referred to, is a contract between two parties, a CFD provider and the person, who make an agreement to exchange the difference between the opening and the closing prices of the contract. The difference between the opening and closing prices of the contract may lead either to the loss or profit. In case the price of the underlying asset increases, the seller pays the difference between the current value of the asset and its opening value to the buyer and if the price of the underlying asset decreases, the buyer pays to the seller. Now let us find out why trade stocks through CFDs.

• The opportunity of making profit both from the rising and falling markets

Since CFDs give the opportunity of trading on the price changes of various assets without physically possessing them, traders and investors can easily amass a huge amount of money both when the market falls and when the market rises by selling and buying CFDs on various financial instruments like stocks, commodities, indices, etc.

• The opportunity of trading with leverage

Leverage is just one of the most compelling features of CFD trading, as it enables traders to trade with high volumes and increase the income by investing a small amount of money. This really sounds very attractive, as in past traders could not have an opportunity of margin trading. The percentage of the leverage provided is varied depending upon the brokerage company.  Nevertheless, it is worth indicating that leverage also carries a high level of risk, since a trader uses the sum of money, which he actually does not possess and in case the market moves against him, he may face significant losses. 

• The opportunity of having access to international markets simultaneously

The possibility of entering international financial markets and trading various stocks at any time of the day is another important feature of CFD trading.

In fact, stock trading is one of the most effective ways of building wealth and if you have already made up your mind to invest your funds, then don’t waste the time in vain and invest them in stocks of the world’s largest companies.