As a beginner interested in trading, there are countless interesting options that are available. You can easily be tempted by any of them. This includes CFDs trading, futures contracts and Forex, among others. While there are always advantages and disadvantages to all of them and clear associated risks, we have to acknowledge the fact that CFD is the best option for beginners. This is due to some clear advantages that are always the case.
Lack Of Ownership
When you trade CFDs, you do not actually own what you invest in. For instance, when you invest in stocks, you actually buy the stocks. The same goes for gold and many other investment opportunities. The simple fact that you own the commodity can be a psychological hurdle for many beginners, especially when referring to situations in which things go wrong.
With CFDs, you do not own what you trade. This is a huge advantage that allows you to quickly move from one CFD contract to the next. If you were to, let’s say, sell gold, it is possible that you have to wait a longer time than you want until this happens.
The Use Of Leverage
Leverage will enhance market exposure and potential returns. This can be a huge advantage for the beginner, especially when following a safer plan that is presented by a highly experienced investor.
With leverage, the investment can be increased a number of times. This does increase risk since what you lose is also increased. However, if your risk tolerance is higher, even if you are a beginner, when the discipline is high, returns can be higher.
It is really easy to use CFDs to sell short. You do not have to worry about paying financing costs as you sell or borrowing stock. All that you have to do with the majority of available platforms is to hit the Sell button. Then, when you want to, you can buy back CFDs.
Lack Of Strict Contract Size
With CFDs, you can trade exactly the number of shares you are comfortable with. As soon as the desired price is hit, an action can be performed. Practically, because of the lack of limitations present in terms of contract size, you can be involved in the market whenever you want to, which is not actually a possibility with many other investment opportunities.
Lower Transaction Costs
When you want to trade with a stockbroker, you have to pay a commission. Usually, this is around $20. When you use CFDs, the transaction commission is much lower. It can easily be at around $7 per trade. Commissions will vary from one country to the next but no matter the location, you can expect much cheaper access when you choose CFDs.
Many other advantages of trading CFDs as a beginner can be mentioned. However, what is important to say at the end of the day is that CFD trading is still trading. This means that you are still exposed to risk. Never invest more than you are comfortable to lose.