InvestTechFX examines the basics, benefits, risks and ease of trading CFDs as opposed to traditional stocks- new conclusions.
Online PR News – 27-September-2011 – – InvestTechFX's reporter explain about CFDs news: "In the Forex market and in the finance world,is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time. (If the difference is negative, then the seller pays instead to the buyer.) In effect CFDs are financial derivatives that allow traders to take advantage of prices moving up (long positions)or prices moving down (short positions) on underlying financial instruments and are often used to speculate on those markets"(Mark Jamson,InvestTechFX).
CFDs are currently available in the United Kingdom, Hong Kong, The Netherlands, Poland, Portugal, Germany, Switzerland, Italy, Singapore, South Africa, Australia, Canada, New Zealand, Sweden, Norway, France, Ireland, Japan and Spain. They are not permitted in the United States, due to restrictions by the U.S. Securities and Exchange Commission on over-the-counter (OTC) financial instruments.
CFDs are traded between individual traders and CFD providers. There are no standard contract terms for CFDs, and each CFD provider can specify their own, but they tend to have a number of things in common.
The CFD is started by making an opening trade on a particular instrument with the CFD provider. For example the MetaTrader 4 Platform used by a company like InvestTechFX. This creates a ‘position’ in that instrument. There is no expiry date so the position is closed when a second reverse trade is done. At that point the difference between the opening trade and the closing trade is paid as profit or loss. The CFD provider may make a number of charges as part of the trading or the open position. These may include, bid-offer spread, commission, overnight financing and account management fees. With InvestTechFX commissions apply to all ECN order types (Manual & EA), at a rate of $5 per Lot. All exchange and regulatory fees are included.
Even though the CFD does not expire, any positions that are left open overnight will be ‘rolled over’. This typically means that any profit and loss is realized and credited or debited to the client account and any financing charges are calculated. The position then carries forward to the next day. The industry norm is that this process is done at 10pm UK time.
CFDs are traded on margin, and the trader must maintain the minimum margin level at all times. A typical feature of CFD trading is that profit and loss and margin requirement is calculated constantly in real time and shown to the trader on screen. If the amount of money deposited with CFD broker drops below minimum margin level, margin calls can be made. Traders may need to cover these margins quickly otherwise the CFD provider may liquidate their positions.
A very important strategy for CFD trading that should be followed by the majority of traders is that if they are a novice in the sphere of CFD strategy they should surely start trading with small sum of cash. Later after they become more successful and realize the negotiating principle, a trader may increase their trading stock and continue earning great sums of cash with the help of CFDs. There are many different strategies created especially for newcomers as well as the experienced traders which can all be employed manually or with an Expert Advisor/Robot Dealer program through the ECN system network offered by InvestTechFX.
In order to become a wealthy CFD trader it is necessary to be well-prepared. A well-prepared, trader is aware of what to do in a variety trading situations and is always ready for possible difficulties. Traders can join various forums and communities to learn and discuss with other like minded individuals who are interested in CFD trading. After gaining skills concerned with CFD trades it is necessary to find a trading platform and try to trade. There are many various trading platforms at the market nowadays. A good trader will see returns quickly with InvestTechFX, which is known for exceptional service and options for all styles of traders. research and application of appropriate risk management strategies are vital notably during unfavorable market conditions. Keep in mind that while leveraging could work favor, it could also go against you. As in any form of trading, CFDs involve high risks which mean they are not suited for anybody just wanting to trade in the financial market. It is ideal that one understands the nature of the contract he or she is going to be involved in as well as the extent of risk exposure.
CFDs offer several advantages compared with certificates and warrants. They are more flexible and open up more trading opportunities to investors. For example, a trader does not own the physical stock, he or she does not need to pay stamp duty. Being a derivative, one can easily buy or sell a CFD. There are no time limits on CFDs including the index and stock contracts unlike futures contracts. In other words, a trader does not need to worry about any expiration date. The contracts are normally rolled into the next month. Trading of CFDs also take long hours and can even be traded 24 hours a day. This is unlike the limited hours involved in the local exchanges. With expanded trading hours, traders can make a stop order any time even during the early hours of the morning if the need arises. As contracts for difference are traded using leverage, they are considered more efficient to use when trading currency. This is so because a trader allots only a small proportion of their position’s total value to get a deal while still gaining full exposure to the market. As CFDs are traded on margin, investors need only a small proportion of the total value of their position to be able to trade. They allow you to have from one percent to 10 percent margin only. Traders can profit from CFDs even when the markets fall. In falling markets, an investor can hedge his long share positions by shorting with CFDs. And in this type of financial market, investors can take long or short positions. With InvestTechFXa trader can trade CFDs in a similar fashion as compared to forex currencies.
In conclusion, CFDs are instruments that provide exposure to the markets at a small percentage of the cost of owning the actual share. They are traded on margin which enables investors to buy or sell an instrument at a lower rate at only 10 percent of the price of the underlying share. CFDs, therefore, serve as an ideal instrument to use for trading notably for those who prefer a commission free instrument.
InvestTechFX is a forward thinking software solutions company providing the MetaTrader4 trading platform for online Forex trading, as well as options to trade CFDs, major Indexes and commodities such as Gold, Silver and Oil. The company operates as a No Dealing Desk and Straight Through Processor to benefit its customers. The MT4 also functions as an Electronic Communication Network (ECN) which is the term used in financial circles for a type of system that facilitates trading of financial products outside of stock exchanges. Any form of Forex trading can be completed directly to the market using the ECN system to further benefit the customers of InvestTechFX. The primary products that are traded on ECNs are stocks, currencies and CFDs.