CFD trading offers some unique advantages to world traders. It is hard to find even one basic need that is not covered by CFD trading. The ten main advantages when trading with CFDs are presented below. Maybe the only disadvantage can be found when scalping Forex. Forex scalpers need EURUSD spreads no more than 1 pip including commissions.
CFD providers usually offer EURUSD at minimum 1.4 pip spread. That is the only disadvantage that can be seen as important, and only for this type of traders.
Here are the main characteristics/advantages when trading CFD contracts:
(1) CFD Brokers Regulation
Today there are tens of high regulated brokers in the market which are offering CFD trading. Most of them provide also Bank Account Segregation to all their clients. In other words, if you choose wisely your CFD provider then you can achieve in a very high extend full safety of your money. Funds safety is always the most important issue for online traders. Some of these CFD companies are even listed in stock markets (mainly UK).
(2) Easy-To-Use Platforms, Accessible in Every Device
CFD brokers offer usually a web-trader platform that is purely internet-based and does not require installation on your PC. These web-platforms are so simple that can be used even by beginners. There are also separate versions for smart-phones and other mobile devices. In addition, some brokers offer CFD trading within MetaTrader-4. MT4 from MetaQuotes is a very interesting platplatform providingtures such is automated trading, back-testing, advanced charting, trading-on-charts and many others.
(3) Extremely Wide Asset Index
CFDs can simply trade every asset class in the world. You can even trade interest rates. There are hundreds of available assets for CFD traders including Forex Majors, Minors and Exotic Currencies, 100s of world shares, 10s of indices and 10s of Commodities. What is important also is that you may trade the same asset in different instruments. For example, when you want to trade Dow Jones, German Dax or Crude Oil you may choose:
□ Trade it on Cash. That means you enjoy a tight spread but you pay overnight charges if you keep your positions after midnight
□ Trade it on a CFD Future. You pay a wider spread but you DON’T pay overnight charges if you keep your positions after midnight. That is a huge advantage for swing traders, like myself. If you are able to predict the direction of the market correctly and you leave some space for your stop-loss then you can make enormous profits by trading CFDs on Futures.
Stock-Indices trend very well without the annoying 'market noise' of other financial instruments. That means you can ride a strong trend using high capital leverage and by placing a narrow stop-loss order. The spreads when trading popular indices are considerably tight.
Trading shares is completely different and you should use very limited capital leverage. Do not trade shares intraday.