The Benefits of Trading Stock CFDs over Traditional Stock Trading
CFDs, or Contracts for Difference, are an alternative trading instrument that gives traders access to multiple asset classes, including stocks, forex, commodities, and even cryptocurrencies. In this post, we’ll go over the differences between trading CFDs on equities/stocks and trading the stocks themselves....
What exactly is a CFDs?
It’s worth starting out by looking at exactly what you’re trading when you’re trading a CFD. Unlike stocks, bonds, and forex, CFDs are not an asset class. Instead, they’re actually trading instruments.
CFDs are OTC (over the counter) derivative contracts that are entered into between a trader and a broker or CFD provider. CFDs are very similar to futures contracts, though unlike futures, they’re priced at the current spot price. Futures, in comparison, are priced for a date in the future and can be traded on exchanges where CFDs cannot.
What exactly is a stock?
A stock represents a share of the equity in a corporation. Stocks give their owners various rights, including:
The right to a proportional share of dividends that are paid out.
The right to information about the company.
The right to vote at shareholder meetings.
The right to a share of the assets if the company is liquidated.
As you can see, there is more to owning a share than merely participating in price appreciation....