What is a CFD and what are its benefits

For those of you who have begun to engage in the stock investing world, what is a CFD? Even some people who have long struggled with the stock was not necessarily know what a CFD. Well, CFD is closely related to trading. It can be said that CFDs are derivatives of other instruments of stock, futures and forex. CFDs were first introduced in the UK in the early 1990s. The extension of the CFD is Contract for Difference. CFDs come with the intention that shares can be traded without having to use large funds. Factors of the emergence of CFD itself is due to the desire of Hedge Fund & Investor. As already mentioned, these CFDs are derivative products derived from other existing trading instruments. Because it has many advantages, CFD is quite interesting to try.

With a much smaller capital than capital for stock trading, you can already buy CFDs. You can say you have the same stock when you buy a CFD, but do not own the stock. When trading CFDs, there are many benefits that you can achieve, in addition to the small capital already mentioned.

One of the advantages of cfd trading is to use the concept of margin trading & leverage. What is the concept of margin trading & leverage in a CFD? When simplified, margin trading & leverage equated with debt. The reason why traders only need a small capital when trading CFDs is because of this concept. Although the capital is relatively small, there is still the possibility of traders earning the same profit / loss as real stock trading. Like other derivative products, CFDs only require contracts because they fall into the type of trade that has no assets. Due to the existence of such contracts, CFD trading has the ability to short sell and have high liquidity. Short Sell can be interpreted that you can make sales transactions in advance although not yet buy. When the market is down, traders can benefit from this short sell facility. Currently only US stocks and shares of other countries can be traded in CFDs. Indonesian stocks are in the development stage.

In CFD transactions, you have the freedom to enter into the liquidation of positions or new positions you want.