Forex/CFDs are Growing – are You on Board with the Trends?
Contributed to and posted by TLB Staff
Forex and CFD trading are becoming increasingly popular among traders and investors at the expense of other assets such as stocks and commodities. Both Forex and CFD trading allows you to trade currencies and contract for differences without actually owning the said currencies or underlying stocks or commodities in the CFDs. This article provides four insights into why traders need to add more forex and CFD positions into their portfolios.
A 24-hour trading market
One of the reasons you should join the swelling ranks of people trading Forex is that the forex markets is always open to traders at all hours of the day. The forex markets permits trading throughout the 24 hours of each trading day once the markets open in New Zealand on Monday until it closes in the U.S. market on Friday. The fact that the forex market never closes provides a bigger window of opportunity to profit from the markets. In addition, the 24-hour nature of the market makes it easy to combine forex trading with other activities because you don’t have to be glued to your screen all day when you can trade the market at your convenience.
Large trading volumes
The second reason you should consider trading Forex/CFDs is that their markets have huge turnovers and daily trading volumes. The forex market remains the largest market in the world with more than $5 trillion exchanging hands each day. Analysts also expect the CFDs market to be worth about $1.86B by 2019. In essence, you can easily trade the markets with a large amount of money without worrying about triggering a buyout or selloff. The large size of the forex and CFDs market also reduces the possibility that any single investor or investors can manipulate the market for selfish gains.
Low cost of trading the markets
The third reason you should join the trending market movement towards CFD/Forex Trading is the low cost of trading the markets. The cost of trading forex or CFDs is probably as cheap as chips because many new brokerage firms provide traders with low cost trading platforms. For instance, some online brokerages don’t charge a brokerage fee to execute a trading order for forex or CFD. More so, the cost of trading forex is often in the ‘negligible’ spread between the currencies. In essence, it costs traders lesser money to trade forex/CFDs than to trade other assets such as stocks or actual commodities.
Leverage to magnify gains
The fourth reason traders are embracing CFD/Forex trading is that it provides them with an opportunity to use market leverage to their advantage. Leverage in Forex/CFD trading simply means that you can use a small amount of cash to trade a larger volume of forex or CFDs. For instance, if you utilize 10:1 leverage on a $1000 trading capital, you’ll be able to trade Forex or CFDs worth $10,000 instead of the $1000 worth of currencies or CFDs that your money can buy.
In essence, leverage can help you to magnify your gains without you putting a large amount of trading capital into the trade upfront. Nonetheless, it is important to note that leverage trades can magnify your gains and it can also amplify your losses.