Trade Stocks CFDs

Share CFDs (Contracts for Difference) have become increasingly popular over recent years.

When you enter into a CFD trade you don’t buy the stock itself but instead agree a contract with the broker to settle the difference in value between the entry and exit price of the Stock. That means when you trade Stocks CFDs with O3FX you get a flexibility that stock market rules often make impossible.

With CFDs you can sell shares as easily as buying them, allowing you to take advantage of price moves even in a falling market. More importantly, because you aren’t actually purchasing the underlying asset you can get leverage of up to 20:1, allowing you to take a large position with a small investment. Leverage of course can significantly increase your losses as well as your gains.

How to Buy Stocks

When looking to buy stocks, there are a few different options that the average trader has. There is the route of buying stocks directly from a stock broker, but one could incur major fees and commissions for having the broker facilitate your trade. This is the old way of stock trading and harkens back to the days when someone would place a phone call to execute a trade.

Also, some of the costs associated with traditional stock trading can be extreme, especially considering how many stock options are Forex Templateilable today as well as the high cost of some of the popular global shares.

Beyond the traditional option, there is online stock trading, giving one access to online brokers. Some of these brokers offer reduced costs, but in many cases, the investor is required to pay a range of fees and commissions for their trading activities.

While the minimum trading requirement is reduced at some online brokers, the fee schedule is excessive, putting a strain on the investor’s profit/ loss ratio. Beyond this, some online brokers only offer access to some markets, such as forex and stocks. This could leave you somewhat limited in your trading choices especially if you prefer trading cryptocurrencies or commodities.

To top it off, many online brokers have started offering ‘pink sheets’ stocks, which are over the counter stocks that are unreliable and volatile. In many cases, information regarding the companies may be difficult to find due to the poor reporting of financial statements. This is also the market used for the sale and purchase of penny stocks, also often referred to as ‘cheap stocks’.

These sell for very small sums of money and while the low price can result in big profits, penny stocks are considered very high risk. To put it into perspective, some penny stock companies have no assets, and provide no services or goods. There has been more than one penny stock that has led to financial ruin for investors.

If you are tech savvy, you might have come across a wide range of investment apps. While these apps are convenient and bring stock trading right into the palms of your hands, some of these apps only offer limited investment opportunities and are limited in their overall evaluation of your financial situation. Before one invests, it is always wise to evaluate a number of factors including your tax situation, any debts and other investments. This is where a regulated online broker takes centre stage.

On the whole, stocks trading has a few pros and cons. On the one hand, there is the ability to earn dividends and to store wealth in a widely recognised financial instrument. On the other hand, you have other issues, such as panic selling during bear markets, the major difficulty associated with short-selling, and of course, the rather high volatility that stocks can have.

Compare all of this with stock CFD trading. This form of trading allows you to trade with leverage, preserving your trading capital for other opportunities. Beyond this, you can simply short the stock without borrowing the shares to sell as you have to with the traditional route. CFDs are one of the easiest ways to speculate on an underlying asset, and as a result, they have exploded in popularity.

In addition, the only costs associated with stock CFD trading will be the bid/ask spread. This brings down the costs of stock trading to very little and removes the broker commission out of the picture completely.

The ability to trade these stocks in this environment is one of the things that many retail traders have come to love. By using this as a financial way to express your views of a company, you are able to do so with low margin, and in both directions, without the fees and complications that may arise.

While you don’t take actual ownership of the underlying shares of the company, you do get to enjoy the most important thing that short-term and swing traders look for: the ability to pinpoint potentially lucrative trading opportunities in the market and to profit from them.