why should a trader choose to trade shares CFDs?
Traders may decide to engage in share trading via Contracts for Difference (CFDs) for a range of motives. However, it’s essential to acknowledge that CFD trading introduces its own array of risks and intricacies. Here are several potential reasons why a trader might select CFD trading for shares:
Leverage
CFDs offer traders the opportunity to attain a more extensive market exposure with a relatively modest initial capital investment. Leverage, a key feature of CFDs, permits traders to manage a larger position compared to conventional share trading. Nonetheless, it’s crucial to note that heightened leverage not only magnifies potential gains but also increases the magnitude of potential losses.
Short Selling
CFDs provide traders with the capability to generate profits from declining share prices through short-selling. Unlike traditional share trading that usually necessitates ownership before selling, CFDs allow traders to speculate on price decreases without holding the actual underlying shares.
No Ownership of Underlying Asset
CFD trading does not entail ownership of the physical shares. This can prove beneficial for traders who engage in purely speculative trading, as it eliminates the obligations associated with actual ownership, such as tax considerations and voting privileges.
Liquidity
CFDs based on shares are frequently characterized by high liquidity, resembling the liquidity of the shares themselves. This ensures that traders can enter and exit positions with ease.
Diversification
CFD brokers commonly present an extensive selection of shares from diverse markets, enabling traders to effectively diversify their trading portfolios across a variety of industries and geographical regions.
Lower Fees
CFD trading might entail lower commissions and fees in comparison to conventional share trading, potentially rendering it a more cost-efficient option for traders who engage in frequent trading activities.
Access to International Markets
CFDs provide traders with the ability to access shares from a multitude of international markets, thereby expanding their trading prospects beyond their domestic stock exchanges.