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When trading CFDs, you’re entering into a contractual agreement with a broker to exchange the difference in price between the opening and closing of a position. Unlike traditional investing, where you own the asset outright, with CFDs, you can trade the price movements of a range of instruments without ever owning the underlying asset.
Leverage allows you to gain increased market exposure with less capital. This means if you want to open a position, you only need a portion of the total trade value, and your broker will effectively loan you the remaining amount.
Weather, politics or global production can affect commodities returns, so the historical correlation of commodities to traditional assets is low. As a result, the returns from commodities may help reduce volatility in a diversified portfolio. Commodities can be a hedge against inflation.
The following are some of the risks:
• You could lose more money in a margin account than you put in.
• The firm has the authority to demand the sale of securities in your account.
• The firm has the ability to sell your stocks without informing you.
• On a margin call, you are not entitled to a time extension....
• You could lose money if you have any open short-sale positions.
The returns are determined by the performance of your performing and non-performing stocks. When you have a well-diversified portfolio, certain stocks will perform well while others will not, affecting your results.
Investing in share market gives you an opportunity to earn potentially higher returns on your investment. Thus, venturing here gives you a chance to compound your money in the long run and accumulate wealth for various life goals.
Greater leverage, reduced trading expenses, and longer trading hours are among the benefits.
• Futures Markets Are Extremely Liquid.... Futures Are Highly Leveraged Investments.
• Low Commissions and Execution Costs...
• Speculators Have a Better Chance of Making Quick(er) Money.
• Futures Are Excellent for Hedging or Diversification.
Before you invest in any stocks, you should look into the company's future potential. When compared to bluechip businesses, all small cap companies have a larger growth potential. Large cap firms, on the other hand, have already established themselves in the market and provide significant returns to shareholders. To summarise, investing in small caps might be advantageous if the company's future prospects are excellent.
It’s important when trading CFDs that you follow risk management procedures to mitigate potential losses. To reduce your risk exposure, try implementing the following:
- Create a trading plan
- Use a regulated broker
- Avoid over-leveraging
- A guaranteed stop loss
- Negative balance protection
The amount of money you can make depends on how much you are willing to risk and what products you decide to trade. A key to a winning trading strategy is to minimise your risk through our guaranteed stop loss feature. However, forex trading is risky and there are no guarantees.