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.
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.
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cfd
models
