Online trading is increasingly becoming one of the favoured ways to achieve the desired financial independence, and if done correctly. It can most definitely take you there. However, it is extremely important that we all understand exactly what that means, what the possible risks are, and more importantly if it is a right fit for your investment portfolio.
A quick reminder of what a CFD actually is. A CFD is a form of derivative trading that enables the investor to try and predict the rise or fall in the pricing of any given asset. When compared to the price they paid whenever the position was opened. In CFDs, you can trade Forex, Shares, Indices, Commodities, and even Treasuries.
- Because you never actually take ownership of any of the assets that you invest in, you are exempt from stamp duty. However and depending on your particular case, taxes may still apply.
- You can trade on both rising and falling markets and still make some serious profits. If you are an investor and there is a period of short-term volatility. You can hedge your existing portfolio investing in CFDs, minimising your total losses of traditional shares by holding a short position in CFDs.
- All CFDs fall under the category of “Margin Trading“. What this means is that you only need to invest a small percentage in any position you choose to open. This gives you leverage to place your capital on other investments as well.
- Most CFDs providers will offer you free registration on their platforms, comprehensive learning centres, and minimum deposits in several different currencies. Which means, you don’t need thousands of dollars to place into a broker service.
- Sometimes the market is so extremely volatile, that prices could drastically change in just milliseconds. Sometimes if you place a position when the price was right for you to make a profit, the query will only be accepted a small instant later. Where, the pricing for the position has already changed, possibly incurring you in losses.
- This could go either way, or its leverage. Because CFDs are margin trading, the profits are potentially much higher, but so are the losses. And you could end up losing even more money than you invested in the first place.
- Online trading creates a similar kind of euphoria as gambling, and depending on your state of mind. You could end up making irrational choices, resulting you in great financial losses.
- When done without proper counselling, the dynamics of online trading can be difficult to fully understand and even frustrating at times. This is why it is important to seek a trustworthy CFD provider and follow all their instructions closely.
That being said, CFDs trading are a great way to expand your investment portfolio considering. You can control your own investing limits, and make decisions based on factual information, and not on feelings. But just in case the idea appeals you, and you are still feeling a bit dubious about it. You can take a look at CMC Markets.
They are a rapidly growing company that has been around CFDs trading from the very beginning. And, can offer you an extremely detailed learning center, investor support, state-of-the-art platforms in which to trade in, both web and mobile, and even a virtual account demo. Here you can demonstrate everything that you have learned during the courses. And, apply that knowledge in real-life market scenarios, without worrying about spending a single dime.
Provided you put to practice what you will learn on CMC Markets, your investment portfolio will be secure and expanding in no time.