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One of the main benefits of cfd's is the ability to trade positions on reduced margin. Depending on the cfd provider, margin requirements can start from as little as 3% for shares and 1% for sector indexes. This magnifies the profits and losses on your investment. Margin requirements are set by the individual cfd provider and include a range of factors including liquidity and market capitalisation. Establishing a short position in a cfd is often easier to accomplish than trading the the physical counterpart. You are not subject to any exchange "downtick" rule which prohibits selling into a falling market. Short positions can be established at any price. Going short can sometimes require the placement of a higher margin on the value of the position, not all brokers facilitate short selling and in some cases the range of securities offered is much more restricted than those offered by cfd providers. Learn to trade ETF's using a proven system Some cfd providers offer guaranteed stops. Usually this involves paying a higher commission but in the case of large gapping situations can protect your capital from adverse market movements. Cfd providers also offer access to different products available in foreign markets over a 24 hour time period. This added convenience opens up the number of trading opportunities and providers greater flexibility for the trader looking for alternative products outside those offered by the domestic market. Next Article: cfd models |
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