CFD (“contracts for difference”) are contracts signed by two sides for the difference in exchange rates of a particular financial instrument. In financial markets, the CFDs are used to trade future and stocks contracts.
There are two ways to earn on shares growth:
Sign a contract with the stock exchange where trades are carried out, and buy shares through a brokerage company.
Open an account with a brokerage firm and enter into Contracts For Difference for the necessary securities. Thus, CFD makes it possible to earn on every change in stock prices without signing an additional agreement with the exchange.
What Is the Advantage Of CFD?
The fact is that a trader pays a certain amount of money for any purchase made. In addition, the trader pays other fees: to the depositary, etc. Moreover, even if you are not making deals, you will have to regularly pay for account maintenance. However, CFD delivers traders from such a necessity. Traders don’t buy shares, but sign an agreement of stock prices change and profit from prices difference without the extra costs.
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