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Sell Short / Buy Long
Because you are trading on the price movement of stocks or indices without physically owning it, it is as easy to sell (go short) as it is to buy (go long). Going short presents you with the opportunity to profit from falling prices. Therefore a CFD trader has the opportunity to profit from both bull and bear markets as well as short-term intra day movements. |
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Instant execution
CFDs allow for instant execution at the market prices provided. This is unlike exchange-traded products which need to be confirmed depending on market conditions. |
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Leverage/Gearing
CFDs are traded on margin. This is a more efficient use of an investors capital because you only have to allocate a small proportion of the value of your position to secure a trade, whilst still maintaining full exposure to the market. In effect you are able to magnify the returns on your investment. |
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Cost Effectiveness
There is no stamp duty on CFD transactions. Equity CFDs can be sold to lock in a profit on an equity holding without necessarily incurring a tax liability. |
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Benefit from Corporate Actions
Just as CFDs mirror the price and movement of the physical share market, they also mirror any corporate actions that take place in the underlying share or index. This means that the owner of a share CFD will receive dividends, and participate in stock splits, just as they would if they owned the physical share. The only difference is that with a CFD you are not entitled to any voting rights. |
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Simplicity
A CFD transaction is essentially no different from buying or selling a product in the physical market. The transaction will be executed at a speed and price that is simultaneous to an identical trade in the underlying instrument. |