If you are aware of financial trading and the different ways of trading like stock, commodities, Forex and other types of trading, you may have also heard about trading CFD. So what is this CFD? CFD is simply a contract for difference which is done between a buyer and seller of it. It certifies to exchange the difference between the price of the underlying asset at the time of purchase and the time of sell. In other way the buyer of a CFD get the benefit or loss from the difference in asset price without actually owning the asset. This underlying asset can be anything like stock, Forex, commodities, equities and other common assets. And for quick and profitable trading, CFD trading platforms are required.
Difference of trading with CFD trading platforms
If you generally compare CFD trading with a traditional trading method like stock trading you will find it operating in the same way as stock trading operates. There is no much difference you sense but when going to the depth there is a difference! Big one! When you are buying stocks, you do it through a stock exchange which is done through a person who is interested in selling them exactly at the time you are interested to buy. The biggest issue here is the supply and demand scope. We do not find buyer and seller for the amount required and therefore we often need to chase the stock. This costs money and time both. When you buy a CFD through one of many CFD trading platforms available, you are not buying any stock through the exchange market but you just buy a contract identical to a stock from the CFD broker.
Thus the advantage of trading CFD is that you don’t have to link to liquidity of the stock exchange and you can buy and sell any quantity easily in CFD trading.
Benefits of CFD trading
You will discover that CFD trading at provides a lot of benefits over the traditional ways of trading and let us have a look over the advantages of trading via CFD trading platforms:
- High execution speed – CFD trading goes faster as there is no buying of any underlying asset and it takes place between you and your broker alone, so speedy results. In stock trading it goes to a long process and first the order is sent to a broker who sends it to a stock exchange and then back.
- Higher leverages – Most of the CFD brokers allow you to trade in higher levels by providing high leverage levels and fast CFD trading platforms. This allows you to trade in bigger amounts by just depositing a small sum as the margin money.
No stamp duty as there is no transaction related to the actual buying and selling of the underlying asset. This money is saved in CFD trading.