If you are interested in making your existing capital work for you in a way that has the potential to grant you some decent profits, and also gives you an interesting and fun thing to do that helps you stay up to date on current affairs, then some form of trading or investing is generally a good idea. There are lots of options – business stocks and shares, commodities like oil and metals, and foreign currencies – but one that not everybody knows about as they go into personal investing and trading is CFDs. CFDs can actually be very well suited to beginner traders (as well as a good money making option for those with more experience and market knowledge). Here we look at the benefits of CFD trading as a rookie in the trading world:
What Are CFDs?
Firstly, it is important to know what CFDs actually are. CFD stands for contract for difference, and it is essentially a ‘bet’ you place on a given market that certain conditions will occur – for example that one currency will rise in value by a certain amount within a certain timeframe, or that the price of gold will close lower. There are quite a few benefits to this over trading actual assets.
Profit on Any Market You Like
One of the first things about CFDs is that you can get them on just about any market, so if you are interested in macroeconomics and believe a given event will, for instance, weaken the dollar and raise gold prices, you can get a CFD on both, rather than focusing on the forex market or the commodities market. Of course, if this is more research than you really want to do and you just want to specialise in one area, for instance currencies, you can do this too, but you never have to miss an opportunity because you are all in on one market.
Profit From Losses
Another of the great things about CFD trading is that you don’t actually buy the commodities, stocks or currencies. This means that you can just as easily profit from things that are falling in value, if you predict it and get a CFD on it, as on things that are rising in value. This means that you don’t need the things you are following to perform well, you just need to be able to anticipate which direction they are going to move in.
Timeframes to Suit You
With most forms of trading, the strategy you use depends on whether you want to day trade or hold longer positions. Most forex traders, for example, trade in sessions and look to close all their positions within that session. With CFDs, you can ‘day trade’ if you want to, predicting things that will happen on a given day for your chosen assets, or you can take longer positions – for instance saying that Brent oil will be lower in price in a week’s time.
Naturally there are risks involved as with any kind of trading – which is what makes it more interesting than simply keeping your money in the bank – however with CFDs, because you don’t actually invest in the commodities and other assets themselves but instead in contracts that predict how they will move, you can start with relatively little capital and learn trading as a beginner without risking too much money.