Eight reasons why you should utilise CFDs in Singapore
Regarding trading, traders can use various strategies and instruments to make a profit. For Singapore…
Regarding trading, traders can use various strategies and instruments to make a profit. For Singapore traders, one option worth considering is CFD trading.
CFDs, or Contracts for Difference, are derivative instruments that allow traders to wager on the price movements of underlying assets without owning the asset. It makes them an ideal tool for those looking to take advantage of market volatility and potentially generate profits from rising and falling prices. This article will discuss why CFDs could be the right choice for your trading needs. For those interested, you can start trading CFDs through a Saxo CFD broker.
CFDs offer high-leverage levels
One of the CFD’s main attractions is its high leverage levels. Leverage is the use of leased money to increase your potential return on investment, and when it comes to CFDs, leverages of up to 500:1 are available. For every SGD1 you have in your account, you can trade up to SGD500 worth of CFDs.
Of course, while high leverage can lead to higher profits, it can also amplify losses. Therefore, it’s important to use leverage responsibly and only trade with an amount of capital you can afford to lose.
CFDs are flexible and versatile
CFDs offer a great deal of flexibility when it comes to trading. One of the critical features of these instruments is that they can be short and long, meaning you can profit from price falls and price rises.
Moreover, traders can trade CFDs on various underlying assets, including forex, indices, commodities and even cryptocurrencies. It gives you plenty of opportunities to diversify your portfolio and take advantage of different market conditions.
CFD trading is commission-free
You will not be charged commissions when you trade CFDs with most brokers. Instead, the broker will make their money from the spread – the difference between an instrument’s buy and sell price.
It contrasts with other types of trading, such as stock trading, where commissions are typically charged. For active traders who make many trades, this can significantly affect the amount of money they spend on fees.
CFDs offer 24-hour trading
The markets for CFDs are open 24 hours a day, from Sunday evening to Friday night, allowing you to utilise opportunities as they arise, regardless of their time.
Of course, not all markets will be active at all times. For example, the forex market is most active when Singapore and London are both open for business – generally between 3 pm and 11 pm Singapore time. However, if you’re looking to trade other instruments, such as US stocks, you can do so outside these hours.
You can trade CFDs on the go
With a mobile trading app, you can trade CFDs while on the go, which is ideal if you are busy or want to take advantage of market opportunities.
Most significant brokers offer mobile trading apps that allow you to access your account and place trades from your smartphone or tablet. You can trade CFDs even if you don’t have a computer with you.
CFDs provide access to global markets
CFD trading provides Singapore traders access to global markets because CFDs are traded over-the-counter (OTC) and are not subject to the same exchange regulations as other instruments.
CFDs are regulated in Singapore
CFDs are regulated by the Monetary Authority of Singapore (MAS), providing some level of protection for traders, as MAS is a government agency responsible for regulating financial markets in the country.
In addition, most CFD brokers are also members of an industry body such as the Financial Industry Regulatory Authority (FINRA) in the US or the Investment Association (IA) in the UK. These organisations provide some level of protection for investors, as they have rules and regulations that member firms must adhere to.
You can use stop-loss orders with CFDs
When trading CFDs, you can place stop-loss orders to limit your losses. Traders can place a stop-loss order to sell a security when it reaches a specific price, which is a valuable tool if you want to limit your downside risk.
For example, let’s say you buy a CFD on the US stock market at SGD100 with a stop-loss order at SGD90. If the market falls to SGD90, your position will automatically close, and you will only lose SGD10.