CFD trading is one of the most effective and convenient mechanisms for speculation on stock prices, futures, commodities, and various stock market indices. Hedge funds are also actively used in the CFD market. The strategy of hedgers is quite simple and effective, and it is worthwhile to dwell on it in more detail before going further.
Features of CFDs
CFD is an abbreviation of contract for difference. For the first time, a similar trading instrument was launched on the British Stock Exchange. With it, you can earn without the need to directly purchase certain trading instruments, such as stocks or commodities, indices or futures. CFD trading is the alleged acquisition of one of these assets using credit funds.
At the same time, the holder of CFD contracts on futures, stocks, and any other assets receives absolutely all the benefits, as well as their immediate holders. That is, CFD trading, in fact, does not differ in any way from trading with real investments since the owner of a CFD also takes advantage of the increase in value, receives dividends, and so on. For this, he only pays the seller of such a contract the costs associated with lending. It turns out that the scheme looks like this: a trader takes a loan to acquire, for example, CFD for shares from a broker, while he earns on the growth/decline of shares, while the broker receives income from interest on loans. So, CFD within one financial contract simply combines all these conditions. This AvaTrade review will help you find out more about CFD trading.