CFDs, or Contracts for Differences, are investments in the difference between the current value of an asset and its value when you close your trade.
They are generally traded on margin, which means you only need to put down a small percentage (around 5% -10%) of the total value of your position as a deposit. This means that you can effectively control large amounts of assets.
Why should I use CFDs?
CFDs come with significant benefits over other types of trading because they allow traders to:
- Invest in both rising and falling markets using high leverage.
- Gain exposure to highly profitable forex trades without having sizable funds.
- To maximise profits, benefit from short selling (i.e. betting on price falls).
- Take advantage of a broader range of instruments, including commodities, indices and shares.
How do CFDs work?
CFDs work by you opening a position (long or short) on the difference in price between when you enter and exit your trade.
You will be quoted a ‘spread’ which is the difference between the buy and sell prices, and your position will be marked to market each day so that any profits or losses are immediately credited or debited to your account.
What risks are involved with trading CFDs?
Like with any other type of investment, there is always some element of risk attached to trading CFDs. The main threats include
- The potential to lose more than your initial investment if the markets move against you;
- Being required to put up more money to maintain your position (known as margin trading), and
- Not being able to close a trade early if the market moves in an unfavourable direction.
How can I use CFDs to improve my investment strategy in Dubai?
Here are 20 ways that you can use CFDs to improve your investment strategy in Dubai:
- Use leverage to maximise your profits on small price movements.
- Take advantage of short selling to profit from falling prices.
- Invest in a wide range of assets, including commodities, indices and shares.
- Trade on margin for a smaller initial outlay.
- Unlock additional market exposure for lower capital investment.
- Benefit from the flexibility to close trades early or hold until expiry.
- Open a position on the difference in price between when you enter and exit your trade (known as the spread).
- Use CFDs to cover your exposures if you own the underlying asset, e.g., use CFDs to hedge against negative equity in your property portfolio or oil investments made in physical form without hedging yourself through an actual sale of oil at the right time – instead sell a portion of your exposure using a CFD contract which is automatically closed before expiry if its value falls below a certain amount, thus avoiding potentially significant losses which are guaranteed by holding the asset itself.
- Take advantage of price fluctuations to maximise your profits.
- Trade on global markets and benefit from increased liquidity.
- Benefit from the ability to trade CFDs on margin, giving you greater exposure to potential profits.
- Use CFDs as a hedging tool to minimise losses on other investments.
- Avoid costly stamp duty when trading in certain countries or regions using CFDs over physical assets.
- Gain access to expert analysis and market commentary to help make informed investment decisions.
- Spread your risk by investing in a range of different CFD products.
- Use stop loss and take profit orders to protect your profits and limit your losses.
- Benefit from competitive spreads and low trading fees.
- Use a demo account to practise trading before risking real money.
- Benefit from the experience and expertise of a regulated broker.
- Get started today and enjoy the benefits that CFDs offer traders worldwide.
CFDs offer investors several advantages over other types of investments, including the ability to trade on margin for a smaller initial outlay, access to a broader range of markets and products, and the flexibility to close trades early or hold until expiry.
In Dubai, CFDs can be used to improve your investment strategy in several ways, including using leverage to maximise your profits on small price movements, taking advantage of short selling to profit from falling prices, and investing in a wide range of assets including commodities, indices and shares. CFDs can also be used to hedge your exposures against other investments, limit your losses or spread your risk by investing in a variety of different CFD products.
In addition, CFDs offer competitive spreads and low trading fees, making them a cost-effective way to trade the markets. To start trading CFDs today, speak to a regulated broker about setting up a demo account. Visit the site to start.