Why Trade CFDs

CFDs (Contracts For Difference) is a leveraged product originated in Australia and quickly spreading around the world as it gives retail investors access to a wide range of markets, stamp duty free and provide the necessary leverage to increase the returns. Gone are the days when margined trading was a privilege of rich and hedge funds. With introduction of contracts for difference retail investors in the UK can trade on margin as well. You do not need to pay all the money upfront as you do when you buy shares but you make a small deposit and the rest of the money is provided by your broker (you have to pay overnight charges on long positions but get paid on short positions), thus £100 will give you buying power of £1,000+ depending on market volatility and investment option. Not only you require less money to make considerable positions but also your returns are multiplied and bring higher returns.

Besides being a margined product CFD trading opens many financial markets to retail investors. You do not have to only trade shares but with CFDs you can trade shares, stock indices, wide range of commodities, currencies (or forex), government and corporate bonds, and much more. The investment markets can very from broker to broker but all brokers provide access to the popular markets outlined above. If you trade shares in the UK, stamp duty of 0.5% is applied whenever you buy shares and no matter if you make money or lose money on the purchase one still have to pay stamp duty regardless. As contracts for difference are derivatives and thus you do not buy the actual shares (but their derivative) you do not pay stamp duty. Like other investments one still have to pay CGT (Capital Gains Tax) on any profits made like with ordinary share dealing and losses can be offset against future gains.

No wonder CFD trading has experienced massive growth in the recent years. No need to invest thousands to make a few percent returns and considerable stamp duty savings (especially for frequent traders) led CFDs to huge popularity around the globe. Visit IndependentInvestor.co.uk to learn more about more investment options in the UK, including CFD trading, financial spread betting and forex trading.