Many have heard about the incredible growth of American companies, especially giants such as Microsoft, Facebook, or Apple. However, earlier it was not easy to get on the NYSE and trade with these companies until CFD contracts appeared. You will learn what the stock CFD trading is about, what features and nuances it has, backing up the information with useful examples.
Contracts for the difference in stock prices
CFD on stocks is a contract for the difference in prices where securities are the underlying asset. In practice, trading such instruments is practically no different from working with real stocks with few exceptions:
- The trader only concludes a contract for the price, he does not get the asset
- As a result, there are no dividends when buying CFDs
- The transaction process takes place only between the dealing center (broker) and the trader
As a result, traders have the opportunity to work with shares on more simplified and accessible conditions:
- You can trade with a small deposit and a huge leverage
- There are no restrictions on short positions
- Instant opening and closing deals
- As a rule, you do not need to install a trading terminal – all trading takes place from a browser or a mobile application
- The status of a qualified investor is not required
More clearly the essence of the tool can be understood by example. For example, you open a deal to buy shares, but at the same time, it is carried out in the form of a contract for a difference in price, and not the purchase of a real asset. The broker from whom CFD is bought acts as an opponent along with other traders who bet on the opposite –lower prices. Only this does not mean that the broker loses on such instruments. Several factors play to his advantage.
One of the most reliable brokers is Avatrade. You can read about avatrade online to check what are the conditions it offers.