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All advantages of CFD trading with stock CFDs at a glance
Trading with a CFD offers you as a potential trader one or the other advantage. CFDs are relatively clearly structured trading instruments that allow for large profits in some cases. For this, you often do not even have to spend a lot of equity to already generate significant returns.
This is made possible by the leveraged trading with CFDs, but also by the fact that you can bet on rising and falling prices - by "long" or "short" order. So you can make profits in CFD trading even in bad markets. Various trading options such as stock CFDs, commodity CFDs as well as crypto CFDs and also ETF CFDs expand your trading possibilities.
Advantage 1 of CFD trading: you can speculate on rising and falling prices
By taking long or short positions, you can speculate on both rising and falling prices. If you decide to take a long position, you profit with every pip (fourth digit after the decimal point) that your CFD rises in the course of the price. At the same time you profit with long positions on stock CFDs on dividend day from potential dividend payments. With short positions, on the other hand, you profit with every pip that your CFD falls in the course of the price.
Thus, you also have the chance to profitably use the highs and lows even in extremely volatile markets. But also bull or bear markets, which show either rising or falling price trends for a long time, are the ideal playground for you in terms of CFD trading. Trading with a CFD therefore works under basically all market conditions and offers you correspondingly good opportunities to make a profit.
But always note that CFDs have a high risk. The risk of loss in CFD trading can even lead to the loss of the entire capital. You must always be aware of this risk.
Advantage 2 of CFD trading: CFD trading allows you to trade quickly and flexibly.
Trading with CFDs is very flexible and fast. Because this allows you a time and location independent trading, as much as you want. So you can usually do this with a smartphone or a laptop - wherever you want. The only thing you need is an internet connection.
Apart from the prescribed stock exchange trading hours for the respective trading center, there are actually no time limits set for you. You also determine the capital investment and thus the chances of winning. No one tells you when, where and how you want to organize your CFD trading. Also your chances of profit or the return on equity you can design completely independently. For example, if you trade with more leverage, you can realize higher returns on the equity you have invested.
Furthermore, you can put together your own individual trading strategy and adjust it regularly. For this purpose, many CFD brokers offer you free demo accounts, where you can not only learn the basics of CFD trading, but also try out your strategy at will. These also allow you to quickly react or change your strategy when market conditions change.
Or do you have a good opportunity for a trade - for example, with stock CFDs - and you want to quickly participate in it? Then simply open your app or laptop and quickly log into your trading account and open a trade. Thanks to practical order types, you don't even have to follow the trade live. With limit order you set a targeted entry point and with stop loss and take profit you determine where you get out again.
Advantage 3 in CFD trading: With leverage you can increase profits in CFD trading with increased risk
By working with leverage, you can increase the return on the equity you have invested. At the same time, however, this always increases the risk of loss up to a total loss. To do this, you must first select the desired leverage (within the EU, you can usually choose between 1:2 and 1:30). Then you deposit the margin due, which is a security deposit. Afterwards, you receive the corresponding borrowed capital from the CFD broker for the period of the trade and can enter into a significantly higher position than would have been possible with your pure equity.
You can see how trading with leverage affects you with our interactive CFD calculator for leverage and margin try out
CFD trading with leverage also works in both directions - you can use it either for long or short positions. The borrowed capital from the CFD broker is granted to you regardless of your individual creditworthiness. You only need to have the margin required for the trade in your trading account. Keep in mind that a high leverage is always accompanied by an increased risk of loss.
Advantage 4 in CFD trading: low fees with short holding period
Unlike regular stock trading, you will experience numerous advantages when trading with stock CFDs, for example, if you decide on the shortest possible holding period. The shorter the holding period, the lower the fees for you as a rule. The longer your position (with leverage) is maintained, the longer your CFD broker will charge you for overnight financing.
Therefore, it is more advantageous for you to enter into several short trades when trading CFDs, rather than opting for one long-lasting trade. This not only saves you comprehensively on fees, but also saves your nerves before the next day's trade opening. Especially over a longer period of time, overnight trades can eat up profits or increase losses.