What Can You Trade with Contracts for Difference?

Contracts for Difference or CFDs are derivatives designed to enable trading in the financial markets, taking advantage of price movements without having to own the underlying instruments. With the growth of the retail trading industry, large brokerage houses around the world allow CFD trading on various asset classes, enabling access to markets that 20 years ago were inaccessible to the average Joe on the street. 

CFD’s includes stocks, commodities, indices and forex

Source: https://blog.deriv.com/what-is-cfd-trading/

# Currency pairs

Many retail traders begin CFD trading with currency pairs, mainly because it is the largest financial market in the world, averaging more than $5 trillion in daily volume. On top of that, there are many forex trading strategies for beginners on the web, which means learning how to get involved in the market is now accessible to a broader audience. 

Trading currency pairs is also favored due to lower trading costs (spreads and overnight swaps) as well as elevated liquidity, leading to more stable valuations and tighter intra-day ranges. As prices fluctuate less than 1% per day most of the time, traders are able to trade on margin and increase their exposure, while using risk management tools (stop loss and take profit) to keep the risk under control. 

# Stocks and indices

Getting involved with stocks issued by some of the leading companies in the world would have been very expensive for many traders, in the absence of CFD trading on stocks. With the use of margins, traders now have access to stocks and can take advantage of both rising and falling markets. They won’t be eligible for dividends, but increased market volatility can generate new trading opportunities.

It is also possible to trade CFDs on some of the leading stock market indices in the world. S&P500, DAX30, FTSE100, or CAC40 were of great interest for retail traders in 2020 and are expected to be popular assets in 2021 as well, especially since asset price volatility is not expected to diminish anytime soon. 

# Commodities

Oil, gold, silver, copper, platinum, and iron ore are just some of the commodities that are traded on international exchanges. As a result, most online brokers are now offering commodity-based CFDs, enabling retail traders to take advantage of price movements in these assets. 

In 2020, the US dollar had been weak and now many analysts believe it is a factor that can lead to a new boom in valuations. Whether that materializes or not is still up for debate. All that matters is that commodity prices are more volatile and thus the use of CFDs can be taken into account. 

# Cryptocurrencies

Bitcoin, Ether, and Ripple continue to be trending cryptocurrencies, but buying them on traditional exchange platforms comes with multiple tradeoffs, including security vulnerabilities and other risks related to storage. Since these assets are very volatile, CFDs based on crypto are already on the market. Retail traders can take advantage of both bull and bear markets, without having to hold tokens. Cryptocurrencies are now being used for diversification and as a protection against the diminishing purchasing power of fiat currencies, which explains the solid demand seen last year as well as now, in the beginning of 2021. 

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