Rintokusmiran.com | Contract for Difference "CFD" Trading - Maybe there are still many of us who are still unfamiliar with the term CFD Trading. This is quite reasonable because this term is less popular among traders in Indonesia and is therefore necessary widely promoted by foreign brokers.
In fact, the origin of CFD trading itself has been practiced in the 90's in the city of London, the capital of the United Kingdom.
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The fact that the number of stock traders and investors in Indonesia is getting higher and higher which can be strong evidence of the possibility there is great interest in this CFD trading activity.
Well, before going further to explain about the advantages, disadvantages and how the trading itself works, it's good here to explain what is called CFD Trading?
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| Contract for Difference "CFD" Trading |
CFD trading can be interpreted as a CFD derivative contract trading activity, an abbreviation of Contract for Difference, between the buyer (buyer) and the seller (seller), where they agree to
pay the difference between the purchase price and the selling price of a number of financial instruments such as currency, commodity, stock or index. Or another definition of CFD is a contract between a trader and a trader
a broker who agrees to exchange the price difference on an underlying asset/security at time between the start and end of the contract.
The explanation is as simple as this: a buyer and a seller participate in a transaction based on the price movement of a stock for example, not based on the stock itself. If
If the stock price increases, the seller pays the difference in price to the buyer. However, if
the stock price at the time of closing was lower, then the buyer would be the one pay the difference in price to the seller.
In this case, the activity actually provides a simple way to speculate on the market without having to own the assets in accordance with the contract. Traders around the world
expect a spread/difference that will benefit them. that is, a trader will get more value from the CFD units they buy or sell if the price of the financial instrument move according to the trader's expectations. However, if the opposite happens where the instrument
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Reasons Traders Do CFD Trading
In fact there are a number of reasons why traders choose this type of activity, which are: can be summarized as follows:
1. Can benefit from both buying and selling
In this type of activity, several options will always be given to traders both for: buy or sell. This means, if a trader believes with certainty that in one day the price of the financial instrument he bought (even though he didn't actually buy it) will rises, then he will take a long position.
Vice versa, if he believes that at some point the price of the financial instrument he bought will fall in the market, then the trader will take short positions.
It can be said that CFD trading will try to minimize the maximum loss that will be experienced a trader, or even profit from the sale of financial assets even though the market price is decreasing. For this reason, why many traders are switching
to CFD Trading because it will continue to provide profits from price fluctuations in the market because he will anticipate this by taking a sell option. Just keep in mind that if price fluctuations in the market are not as expected, then the trader may loss.
2. Protection of Investment Portfolio
If an investor feels anxious that the current value of his investment portfolio is predicted to dropped in the market, then the investor can take advantage of CFD trading to avoid loss by taking short positions. Thus, there is a loss due to a decrease in the value of portfolio will be minimized through the profit generated from the sale of the trading CFDs. Reportedly, now there are many investors in the country who use
Trading CFDs to protect their investment assets, especially during times of high price volatility in the market and has a high risk as well.
3. Gaining global market access with just one platform
Most of the brokers that offer CFD trading services will usually offer a variety of services variety of trading products on the global market, especially in developed countries such as the US, Europe and etc.
Thus, traders, using only one platform at the broker selected, can easily trade on financial instruments such as currencies, stocks, cryptocurrencies, etc. in various world markets.
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