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What are the benefits of CFDs? from jenniwings's blog

A CFD (Contract for Difference) is a financial derivative  that allows traders to profit, or incur losses, relative to the price movements of an underlying financial security. Exempt from UK stamp duty: Because the underlying asset is never purchased or sold, CFDs are free from UK stamp duty.>>

Go long or go short: Unlike trading shares CFDs allow you to profit, or incur losses, when the market is falling.>>

Deductible against UK Capital Gains Tax: Losses from CFD trading can be offset against UK Capital Gains Tax liabilities. Conversely, profits are liable to UK CGT. Tax laws are subject to change and depend on individual circumstances, please seek individual advice.>>

Hedging: Traders can potentially offset any losses to their share portfolio by short selling the same security with CFD trades.>>

Leverage: CFD trading is leveraged which means that only a small amount of the total trade value needs to be deposited. This also means that losses may exceed deposits.>>

What are the costs of CFD Trading?>>

Spread: In both of the above examples the trader incurred the cost of spread. Whether the trade had resulted in a profit or a loss, this spread cost would remain the same. The tighter the spread, all things being equal, the lower the cost of trading.>>

Commission: Certain CFD trades are subject to commission.  This will vary depending upon the market and currency traded.>>

Overnight financing: Overnight positions are often subject to financing charges. These are typically set around 2.5% + LIBOR for long positions, and LIBOR – 2.5% for short positions.  This is in effect the charge for leveraging the position.>>

Expiry>>

The majority of CFD trades do not have a set expiry date, position can be closed when a trader wants. However, there are some forward and futures contracts that expire at a set date. These contracts can still be exited early if the trader so wishes.>>

CFD positions that are left open overnight are known as ‘rolling’, and are subject to overnight financing charges.Buy Forex Online: With Axis Forex online send money in 100+ currencies to any bank account in the world. Buy forex card and go cashless across the globe>>

Source : https://www.corespreads.com/knowledge-base/cfds-explained/>>


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By jenniwings
Added Apr 28

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