One of the most important benefits of CFD trading, as with all financial markets, is that leverage is available to you. This means that you can trade with increased leverage, which offers you ‘financial leverage’.
This usually means that you can trade for a larger amount of money than you have in your account, and as a result, you can potentially earn a much larger profit. However, if every share was priced at 150p, then you would simply need to deposit 750 of the margined position margin (5 x 150p) plus the appropriate fee, which in this case would be 12.
Another of the major benefits of CFD trading south africa, as with most markets, is that there is ‘profit locking’ and ‘loss locking’. With profit locking, this essentially means that your trades will remain open if the price moves against your position, meaning that you do not risk losing any of your funds.
With loss locking, on the other hand, you will be unable to close your position, but rather, will be unable to incur any gains on your traded shares. These features of CFD trading are designed to reduce the risks associated with trading stocks and options by providing you with extra protection. Of course, it should be noted that even with this level of protection, there are still benefits that you could gain by limiting your losses.
The lower margin required in CFD trading generally equates to a smaller spread, meaning that the price of each stock or option is usually less than it would be if you were to trade the shares yourself. In addition, CFD trading margins are usually less than or equal to those of regular trading in the stock market, meaning that you are typically able to gain a greater return on your trades.
The use of margins also allows you to have greater control over the overall value of your portfolio, as it enables you to set limits as to how many physical shares or options you wish to trade. This allows you to reduce risk levels more effectively and minimize your losses more effectively as well. In the end, both these factors mean that CFD investors can achieve a higher rate of return on their investments than they would if they traded shares directly.
Although this is true, it should be noted that it is possible to lose money with CFD trading, just as with any other investment. Just as in most types of investment, it is possible to suffer losses through bad luck, as well as through unexpected changes in the market.
To reduce this risk, you need to ensure that you know when to exit a trade and that you have sufficient stop-loss orders and protective orders in place if the trade goes against you. CFD trading strategies can also be complex and difficult to understand, making it far easier to lose out in bad trades. Because of this, it is imperative that you seek the advice of an expert CFD trader before entering the markets and never start CFD trading without first completing a suitable training course.