CFDs and Financial Freedom | Personal Finance Views

Wednesday, April 13, 2016

CFDs and Financial Freedom

Contracts for difference offer a number of unique benefits not witnessed within more traditional trading circles. In fact, many budding investors have come to appreciate the mechanics behind these instruments and are well on their way to enjoying financial freedom. To fully understand the potential for profit, it is critical to highlight some of the primary aspects of a CFD as well as how to address the potential risks which are naturally present.

A Kaleidoscope of Trading Options

An attractive aspect of the CFD markets is that nearly every underlying asset possible can be traded. This is a welcome opportunity for investors who have learned to appreciate the power of open-market diversification. Some examples include:
  • Commodities
  • Indices
  • Government bonds
  • Foreign currencies
Each of these sectors has its own unique benefits and varying levels of liquidity.

Flexible Trade Times

CFD markets are normally open 24 hours a day throughout the business week. This is extremely beneficial for the part-time trader or the full-time investor who is hoping to take advantage of a sudden movement on the other side of the world. Thus, CFDs have few temporal limitations. This is in direct contrast to many index-based equities.


Leveraging for Profit

Many experienced traders will employ leverages to maximize profit levels during a specific trade. Another hallmark of a leverage is that only a portion of the total value of an asset needs to be purchased. Should the trade move into a profitable position, the client stands to make a tidy sum of money. It should still be mentioned that losses can occur; particularly if one is new to this strategy. It is therefore wise to only leverage one’s capital when these funds can be lost with little overall impact upon the larger financial picture.

Limiting Risks

It is clear to appreciate that CFD trades carry their fair share of risks; not unlike any financial venture. There are several ways to avoid such negative outcomes. Emotionless trading and utilizing the cutting-edge trading platforms are two vital mechanisms to employ. Stop-loss orders will also help to mitigate these risks (while not eliminating them entirely).

Time Frames

Those who are overly eager to make the proverbial fortune are the very same individuals who stand to lose a great deal through lack of foresight and impatience. Any CFD trade should be viewed as merely a single step along the way to sustainable financial freedom. It is also recommended that a step-by-step approach be adopted through the use of demonstration platforms alongside incremental investment strategies.

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