CFD trading is becoming more and more popular, as traders are looking for new ways to make money in the markets. But what is CFD trading in Singapore, and how do you get started? In this guide, we’ll walk you through everything you need to know about CFDs, including what they are and how they work.
What is CFD trading?
A CFD is a contract for difference. This means that the price you pay when you buy the CFD will never be equal to the price of the actual asset, and neither are they guaranteed to rise or fall in line with the said asset. The only thing relating your trade to an underlying asset is their value at any time. So, while you may not see the returns as high with CFD trading compared to other investment vehicles, there are risks and rewards associated with this type of trade that should be considered.
How do CFDs work?
When you buy a CFD, you’re essentially entering into a contract with the broker. You agree to pay the difference in price between when you open the trade and when you close it.
The upside to CFDs is that they allow traders to speculate on the direction of an investment without physically owning the asset. Traders can open positions in any market, including interest rates and currency pairs — although they are not limited to these markets alone.