An Introduction To CFD Trading Australia

By | February 9, 2016

CFD which means contract for difference gives the opportunity to the individual traders to trade on the price fluctuations in the number of financial products.

CFD trading

What is CFD trading Australia?

CFD trading Australia is an alternative to the traditional investing methods and can increase your wealth in a dramatic way. CFD stands for a contract between you and the broker which allows you to make a bet on which side the value of underlying assets will fall as compared to the time when the contract was opened. In CFD trading you do not actually owe the assets but you just trade on the live price movements. This means that you are saving the costs associated with the actual ownership of the assets and you can still take the advantage of the trends in the market. Though there are many advantages associated with CFD trading Australia, there are some risks associated too.

What are the benefits in CFD trading?

CFD trading Australia provides a lot of benefit to the traders which other traditional trading methods can’t provide. With the facility to trade without owning the assets a lot of costs involved in owning and transferring the assets are removed. You don’t have to pay the stamp duty, holding and transferring costs of the assets.

The ability to take benefits of both the rising and falling markets is another great advantage of CFD trading. Whether the price of the asset is going down or going up, you can take the advantage of both ways in CFD trading and by speculating right you can take the profits.

Leverage is another great benefit of CFD trading Australia where you can trade on high volumes depositing only a small portion of the total trade volume as margin. Leverage ratios can go as higher as 100:1 where you can trade with 100 times the money you have.

You can trade in any of the financial markets you like through a single CFD trading account and use CFD trading as a means of hedging your portfolios too. If you have already traded in a financial market and you have good experience in it, you can use the same experience in trading CFDs without owning the actual asset class.

Risks in CFD trading

Though there are many benefits in CFD trading Australia, there are some risks associated with CFD trading too. Trading on high leverages can cause big potential of profits but also increase the big potential of losses too and you can face big losses if the market goes against you. Therefore leverage has always to be treated with proper management and excessive leverage should not be taken.

The other possible risk is the danger of fraudulent brokers and dishonest brokers who can compromise your invested money. There is not much regulation today imposed on CFD trading by the regulating authorities and therefore searching for a good and reputed broker is very much desired.