Issuu on Google+

Activtrades – CFDs or share trading

Since Contracts for Difference (CFDs) became more mainstream over the last few years, many traders with Activtrades accounts have been curious about switching from their share trading over to this relatively new method, but have been hesitant to do so because of a lack of information regarding whether or not this is a smart decision.

As with most things in life, the answer is not entirely straightforward, as each method has its own pros and cons. Generally speaking switching from share trading to CFDs has worked well for many traders; however it really depends on the trader’s style and capitalisation.

An important point to note, which many share traders are initially unaware of, is that with CFDs, the trader does not own the shares. So, if the trader wants to claim ownership over shares so as to have a vote at a company’s annual meeting, for instance, then switching from share trading to CFDs may not be the best move. However there are some very significant financial advantages for traders who decide to use CFDs on equities, as these are derivative products, and they allow for significant leveraging of the initial investment.

Those who Activ Trades with CFDs can enjoy the advantages of share price speculation for far less than it would cost to purchase the shares, so if a trader has limited funds, CFDs are certainly worth considering. CFDs are available on a huge range of financial products, including foreign shares and indices, so even though the trader won’t have access to all domestic shares, they can still try out a wide range of markets.

Furthermore, with CFDs there is the opportunity to take out both short and long positions. Compare this to share trading. Taking short positions with physical shares is often expensive and complication, and may require the trader to roll their position every 20 days; each time this is done, they would have to pay stamp duty and brokerage commission. In contrast, a short position with CFDs can be held indefinitely.