Why A Lot Of Traders Prefer Contract For Difference
A lot of CFD traders are searching for guide about the best CFD day trading strategies. Well, this article gives you valuable reasons about why day traders opt to trade for CFD over other products out there. This article also covers some of the best CFD day trading strategies.
With CFD trading there is no overnight financing
Contracts for difference have a financing rate when you hold a position overnight. There is an RBA rate (cash rate) +2% for financing for long positions. Hence, if the RBA rate is 7%, then you will have to pay 9% per year calculated as day rate. To avoid, this, all you need to do is to make sure to close your position before the trading is done. Through it, you will be able to avoid CFD financing rates.
Incredible CFD leverage for day traders
Day time traders know very well how fantastic leverage they can get access to in CFD trading. For example, if you have $5,000 in your stock trading account, then you will only be allowed to trade $5,000 plus only a 5% move on. If you take that exact amount on CFD and decided to trade $20,000 position, then the said 5% will up to $1,000. If you come to look at it, you might earn or loss extra $750 with no more effort on your end.
CFD traders have a significantly low commission rates
What made CFD trading stands out among other financial trading platform is its significantly low commission rates. As a matter of fact, index CFDs which is one of the popular products of CFD is commission free. It will instantly give you access to fast moving product for zero brokerage. The brokerage fee is very low even if you day trade the top 100 CFDs. The usual brokerage fee is 0.1%, which is really beneficial for the traders.
Solid CFD liquidity
Short term day traders are in search for a highly liquid market. Contracts for difference mirror the liquidity of the underlying stock market. If you are trading under DMA or Direct Market Access provider, you will be able to know the available exact volume on every stock at different levels of depth. The day traders of CFD should have high volume stocks as well as transparent market depth book. This is the reason why short term day traders use DMA CFD Weblress.
Extremely high day time trading volatility
Day time traders simply love volatility. With financial trading, CFD trading and volatility are a perfect pair. As a day trader, you cannot just sit and watch the stocks go nowhere. You want to ensure that the movement of stock is fast. Hence, if the markets are volatile the short term day traders are profiting really big from the short sharp day movements.
Conclusion
As you can see, traders can benefit a lot with CFD trading. It gives an opportunity to people to get involved more with the trading process and generates more value than what they have actually contributed. It generates a higher return of investment more than any other trading platforms. There is also no purchase of assets involved.
The agreement is solely based on the total value of the asset and has nothing to do with purchasing or whatsoever. Aside from that, stamp duty is no longer needed and traders can earn dividends. What made the process even more beneficial is that the brokerage firm pays interest to the trader.
Author Bio
Peter Dav is a freelance writer who is interested in writing articles of varying niches. His most recent article is all about providing guide on how to make money and make it big in CFD trading.
Category: Investing
