Forex CFDs are the contracts used for trading currency pairs through leverage. In today’s forex market, it is highly volatile. So, traders choose to trade the asset class using the CFDs, which enables them to speculate both rising and falling prices.
CFD (Contract For Difference) allows traders to speculate on the future market movements of the underlying asset without taking or owning the physical delivery of the underlying asset. Contract For Differences are available in various underlying assets, such as:
- Shares
- Commodities
- Foreign exchange
- CFD Trading
When trading cfd, you can use the online CFD trading platform by using the vantage app to perform the trading. All CFDs are traded using leverage, you can put up a small deposit called a margin to open a larger position. As the total loss or profit is based on the full size of the position; either outweighs the margin amount. You can take appropriate risk management steps when trading CFDs.
CFD trading and spread betting
Many traders are choosing to speculate on forex using the spread bets, and leveraged derivatives. Both CFD trading and spread betting could hold tax benefits. Spread betting has greater control over the deal size than in CFDs and you can choose a smaller bet size. You can open a position using the fraction of the capital with CFD and spread bets. The two leverage products share lots of benefits, yet each has unique advantages, so you must discover which one best works for you.
The benefits of CFD trading are:
- DMA (Direct Market Access) on shares
- Losses are offset against the profits for tax purposes
- Deals on rising and falling markets
- 24-hour deals
- No stamp duty
- Leveraging access to markets
- Use prices established on the underlying market
While the benefits of spread bets are:
- No commission aside from the spread
- No capital gains tax
- Bet easily on a chosen currency with greater control of the currency exposure
- Leveraging access to the markets
- Deals on rising and falling markets
- 24-hour deals
- No stamp duty
- Use prices established on the underlying market
CFD trading exchanges the difference in price at which the contract is opened and closed. Ocado’s share price rose by 10 points from the opening price of 11510 to the closing price of 11520. You can buy 20 share CFDs of Ocado – it is the equivalent of buying 20 Ocado shares, and you would profit £2 not including the commission fees.
