CFDs as Investment in the UK

FinanceTrading / Investing

  • Author Serge Martin
  • Published August 17, 2009
  • Word count 505

Investment opportunities are many and varied, and in the UK, you can invest in Contracts for Difference, commonly known as CFDs. Contracts for difference is the financial instrument to trade in instead of the underlying shares. If you get CFDs fro investment, they will operate at the same price of the underlying shares but you will not acquire any rights regarding the shares. The attractiveness of these shares lies in the fact that you can sell without a problem.

Other benefits of investing in CFDs include access to a wide range of markets. In this kind of investment, you will have a wide range of assets that you can access. You also do not have to part with any stamp duty while investing in CFDs. You are usually assured of goods returns based on your initial capital. You can also close out a deal at any time and you are likely to have cash flows daily. You can also limit the amount you are loosing by applying for a stop loss.

The Contracts for difference investment trading is done on margin. Whatever you get as profit or loss is determined by the difference you get from the buying and selling price. Investing in CDFs is suitable as a short term investment measure. This is because their costs usually increases with time and the tables may turn against you if you stay for too long. With a CFD account, you can make your deals through the telephone or online. Telephone deals involve calling the trading desk to get information on specific market quotes. You can then whether you want to buy or sell after hearing what the CFD price is. To avoid the dealer changing the price quote, you have to make your decision very fast.

After you have made your decision, you are required to inform the dealer of the number CFDs you want to trade in together with your name and account number. The whole process will be complete once the relevant account checks have been validated. If you to transact your business online, you will have more control over your account and full access to the trading floor. All you need to do is to log on and you will be able to follow your CFD performance. You will also have access to your margin balance, which means that you will be able to make a good trading decision based on your current margin difference.

You can get CFDs on stocks or shares affiliated to the FTSE 350. If you do not want to invest in shares, CFDs are a good option for you. They are easy to trade and their price movements are similar to those of shares or stocks. Just like shares, they have no expiry dates and you get the same dividend payments as in shares. You will be able to know to how your equities are performing without the need for shares. Success in this investment market only requires that you know when the underlying share investment will go up.

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