CFDs are excellent trading instruments because they allow
traders to participate in the stock or futures markets at a
fraction of the cost of traditional trading!
What are Contracts for difference (CFDs)?
A CFD (contract for difference) takes the form of an
agreement to exchange the difference between the opening and
closing prices of a particular instrument. Unlike a share trader
or a commodity trader who makes a profit by buying and selling
the underlying stock or commodity being traded, a CFD trader
never owns the instrument being traded. Therefore, CFDs do not
require a broker or an exchange fee and they don’t require the
full value of the underlying instrument to purchase. As a
result, CFD traders can capture the value of market movements in
stocks, indices and commodities more efficiently. Moreover, ICM
traders can trade both Forex and CFDs from the same ICM trading
Investors start by entering into an agreement with a CFD
provider such as ICM. Each side commits to settle the difference
between the price of an underlying instrument when the agreement
is made and the price at the end of the agreement. If we use
gold as an example, this means a trader has an interest in the
price deviation of gold from its original value without actually
having to purchase gold. If trader believes the price of gold
will increase, the trader can purchase (or go "long") gold CFDs
and if the trader believes the price of gold will decline, the
trader can sell (or go "short") gold CFDs.
Why trade CFDs with ICM?
CFDs are relatively simple to trade -
particularly with online trading providers such as ICM. CFDs
allow traders to capture the value of market movements less
expensively and more efficiently than buying the instrument from
which it is derived. This is because 1) CFD traders trading with
ICM avoid brokerage and exchange fees and 2) CFD traders trading
with ICM benefit from industry leading margins ranging from
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Moreover, CFDs can make an excellent
complement to most investing methods mostly due to the fact that
you can buy or sell a wide range of markets in any market
condition. Because CFDs are based on underlying financial market
movements, they can also suit most trading strategies -
including hedging strategies - as they follow the same
patterns and trends as the markets from which they are derived.