Why is CFD trading so popular in Singapore?
This question has been asked numerous times since CFD trading became common. It is not uncommon to see new traders jumping on the bandwagon, hoping to make a quick buck with little or no knowledge of how CFDs work and what these products can do for your investment portfolio.
This article will present ten reasons why you should trade with CFDs. I hope that they will convince you of the strength and benefits of this financial instrument and show you why it is essential to gain all the knowledge necessary before starting with such an endeavour.
Leverage
Leverage gives traders access to assets without having to purchase them at the total price – instead, we only need a fractional percentage of the total purchase price, called margin.
Stop Losses
Stop losses come into play when traders automatically cut their losses when the market moves against them by a certain percentage (commonly around 100-200 points for most instruments). These can be set up to protect traders against sudden price movements, removing the need for constant monitoring and bracing for impact.
High Leverage – Low Margin Requirements
Most CFD brokers allow their clients to use high leverage levels with low margin requirements per position, which provides access to assets without depositing huge sums at once.
No commissions or brokerage fees
CFD brokers usually offer zero commission or distribution costs on each trade stemming from their clients’ trades, which essentially means that traders will keep all of their profits without having to worry about additional costs imposed by brokers cutting into their bottom line. Of course, some online brokers charge transaction fees, but these are usually minimal and can be avoided by choosing the exemplary brokerage service.
Professional Platforms
Many platforms provide advanced trading functionality for CFDs, which allows their users to quickly place orders using signals or trigger automated alerts when specific levels of volatility are reached. These features give traders an edge when it comes to executing trades at the right time, thus improving their chances of success.
Access to Large Range of Instruments
Trading CFDs gives you access to a wide range of forex instruments – from significant currencies such as USD/CHF to some exotics such as NZD/MYR. With some brokers, you do not even need a large deposit to start trading with CFDs – you can make your first trade immediately after signing up and depositing the minimum amount (usually around $50).
Online Trading Available 24/5
Trading CFDs is ideal for online trading since traders do not need to monitor their positions to ensure that they are not losing money. As long as you have set up proper stop losses and covered your potential risk with a solid trading strategy, it will be straightforward to keep track of your trades and exit the market at the right time to secure profits.
Low Minimum Balance Requirements
Traders can get started with CFDs even if they only have a small sum of cash available – most brokers offer low minimum balance requirements when starting. It can benefit traders who are just learning the ropes and want to minimise the initial risks while testing different trading strategies.
Complete Control of Trading Positions
Traders do not have any restrictions on trades, meaning that they can close or open positions whenever they see fit to maximise profit potential or cut losses at critical moments.
Ability to trade 24/5
One of the most apparent advantages of CFDs is that traders can place buy/sell orders at all times during the trading week without having to wait until trading hours are over before deciding what action should be taken regarding their current holdings. It gives them an edge over regular investors, who would typically need to wait for the market to close to avoid missing out on the best deals of the day.
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