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Three reasons to dump shares and trade CFDs

by , 19 December 2014

If you're looking for a better way to generate short-term profits than investing in shares, perhaps it's time to consider trading contracts for difference (CFDs).

Trading CFDs has a number of advantages over investing in shares. Trading CFDs does comes with higher risks than investing in shares, but the rewards are potentially far greater.

So why should you consider dumping your shares and trading CFDs instead?

Read on to find out…

Three advantages of trading CFDs over investing in shares

Advantage #1 of trading CFDs: CFDs are geared products

CFDs are geared (leveraged) products. This means there’s a money multiplier effect at work on your returns (and losses).

By trading a geared product, you borrow the funds to purchase a financial instrument. In return for paying a small deposit (margin), you have full exposure to the price movements of the underlying asset.

If you invested directed in the underlying share, you’d have to pay the full value of them. With CFDs you only have to put down the margin.

Advantage #2 of trading CFDs: You can short-sell

Unlike investing in shares, with CFDs you can short-sell. This means that no matter what direction the market is going in, you can profit.

For example, if you think a share is going to rise in value, you can buy into a position. This is ‘going long’. Yet if you think a share is going to fall in value, you can sell a position. This is ‘going short’.

Advantage #3 of trading CFDs: Lower trading costs

Compared to investing in shares, trading CFDs have lower trading costs.

The trading costs of trading CFDs work out at a fraction of the normal commission and brokerage of investing in shares.

Also when you trade CFDs, you don’t have to pay stamp duty, STT (securities transfer tax) or STRATE fees. And depending on who you trade through, you may also not have to pay VAT.

So there you have it, three reasons to dump shares and trade CFDs.

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Three reasons to dump shares and trade CFDs
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