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  • What are CFDs?

    CFDs are a means of taking a position on the market of an underlying asset without having to own the underlying asset upon which your contract has been drawn. A CFD, or Contract For Difference, is a mutual agreement between two parties to exchange the difference between both the opening and closing prices of an underlying asset. CFDs bring with them a great many risks for new traders, so building a strong knowledge-base is incredibly important to the security of your finances. Conversely, CFDs boast several benefits over standard spot trading, so spending some time weighing up the pros and cons with regards to your trading goals is a great idea when starting out.

    If you’re entirely new to trading, CFDs may not be a suitable starting point; the added variables that come with trading derivatives may not be conducive to the learning process.  Equally, trading CFDs does bring with it the advantages of no stamp duty (depending on your location), the option of a full exposure with a comparatively small initial deposit, an expansive range of leveraged products and the ability to gain in both bull and bear markets.

    CFD trading is perhaps best-suited to speculating on short-term changes in the value of an underlying asset, which, in real terms, means the ability to open and close positions in minutes. This translates into a potential to capitalise on short-term market fluctuations.  

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