Economy
CFD Trading | Comprehensive Review Prepared By Traders Union
CFD trading, short for Contract for Difference trading, represents a significant innovation in financial markets. This form of derivative trading allows traders to speculate on the rising or falling prices of fast-moving global financial markets, offering unparalleled flexibility and opportunity.
Traders Union has reviewed CFD trading and provided traders with a detailed review. In the heart of the dynamic financial world, CFD trading has become increasingly popular, but what does it really entail? Let’s explore this trading avenue and reveal why it is crucial to your investment portfolio.
What are CFDs?
Contracts for Difference (CFDs) are financial derivatives that allow traders to profit from price movements in an underlying asset without owning it. Essentially, a CFD is an agreement between the buyer and the seller. They agree to exchange the difference in the value of a particular asset from the point the contract is opened to when it is closed.
In essence, if the asset price increases, the buyer profits, as they receive the difference from the seller. However, if the asset’s price drops, the seller benefits by receiving the difference from the buyer. The nature of CFDs means that traders can profit from rising and falling markets, depending on whether they choose to ‘go long’ (buy) or ‘go short’ (sell).
Pros and cons of CFD trading
Traders Union experts highlight several key advantages and disadvantages associated with CFD trading.
Pros
- High leverage potential: CFD trading allows for a higher degree of leverage than other forms of trading.
- Diverse asset classes: Traders can access various asset classes from one trading account, making portfolio diversification more straightforward.
- Reduced transaction costs: Generally, CFDs have relatively low transaction expenses, which is particularly beneficial for short-term traders.
- Flexibility: CFD traders are not obligated to own the underlying asset, allowing for increased flexibility and ease.
Cons
- Limited dividends: For stock or bond CFD trading, traders are not entitled to dividends or coupon payments.
- Broker dependency: As the primary contracting party for CFD transactions, your chosen Forex broker’s reliability becomes crucial.
- Less regulation: The CFD market is less regulated than traditional markets, posing potential risks to traders.
What type of CFD successful traders choose
Successful CFD traders usually have several considerations in mind when selecting their trading instruments. These include the liquidity and volatility of the chosen CFD, the reliability of the Forex broker, the potential transaction expenses, and the understanding that CFD trading doesn’t imply the delivery of the underlying asset.
There is considerable diversity in terms of the specific types of CFDs that successful traders often gravitate towards.
Types of CFDs
According to Traders Union, there are several types of CFDs.
Commodity CFDs
These involve contracts on various assets such as gold, silver, oil, natural gas, soy, coffee, maize, etc. The most traded commodity CFD is XAU/USD (Gold CFD).
Cryptocurrency CFDs
These contracts are based on major cryptocurrencies, like Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP). BTC/USD contract for difference is the most traded cryptocurrency CFD.
Index CFDs
Very popular among traders, these contracts are based on indices such as US 30, US 500, DAX, Euro Stoxx 50, CAC 40, FTSE 100, and others.
Other types of CFDs
This category includes Bond CFDs, Stock CFDs, ETF CFDs, Interest CFDs, etc. Stock CFDs are the most popular in this group, with Apple CFDs (AAPL) often being the most traded.
In addition to the CFD trading review, TU analysts about eToro are positive and reviewed the broker for traders, eToro has been highly regarded for its cutting-edge social trading platform, offering a wide array of tradable assets and a user-friendly interface. To read an in-depth review, please visit the official website of the Traders Union.
Conclusion
CFD trading can offer traders a unique way to access and profit from various financial markets. It offers several advantages, such as high leverage, diversification, and lower transaction costs. However, it also comes with its share of risks and challenges, such as a lack of dividends and potential broker dependency.
As with any form of trading, successful CFD trading requires a good understanding of the market and a well-structured trading strategy. With a cautious approach, diligent research, and continuous learning, you can successfully navigate the CFD trading world. Visit Traders Union’s official website to learn more about CFD trading and other trading avenues.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited suffered its first loss this week with a 0.46 per cent decline on Friday, influenced by profit-taking.
The market was under selling pressure yesterday, with all the key sectors of the bourse closing in red when the gong was struck by 2:30 pm.
The commodity index was down by 1.94 per cent, the insurance sector depreciated by 0.22 per cent, the industrial goods space lost 0.18 per cent, the consumer goods counter went down by 0.05 per cent, the energy industry tumbled by 0.02 per cent, and the banking sector fell by 0.01 per cent.
As a result, the All-Share Index (ASI) contracted by 498.56 points to 108,733.40 points from 109,231.96 points and the market capitalisation retreated by N314 billion to N68.339 trillion from N68.653 trillion.
The market participants traded 459.2 million equities valued at N11.2 billion in 15,723 deals on Friday versus the 554.1 million equities worth N14.4 billion traded 16,704 deals in the preceding session, implying a decrease in the trading volume, value, and number of deals by 17.13 per cent, 22.22 per cent, and 5.87 per cent apiece.
Tantalizers traded 101.4 million shares for N237.3 million, GTCO exchanged 51.3 million equities worth N3.5 billion, Access Holdings transacted 45.2 million stocks valued at N975.3 million, Zenith Bank sold 21.8 million shares worth N1.1 billion, and Sterling Holdings transacted 15.5 million equities valued at N91.8 million.
The heaviest price loser was Transcorp Power with a decline of 9.98 per cent to settle at N328.50, Haldane McCall fell by 9.57 per cent to N4.25, Meyer lost 9.09 per cent to trade at N8.00, Regency Alliance dropped 6.78 per cent to finish at 55 Kobo, and Sunu Assurances crumbled by 6.73 per cent to N4.99.
On the flip side, ABC Transport chalked up 10.00 per cent to quote at N2.86, Sterling Holdings also expanded by 10.00 per cent to close at N6.05, Chellarams improved by 9.94 per cent to N10.40, Academy Press gained 9.92 per cent to finish at N4.32, and Red Star Express appreciated by 9.90 per cent to N5.55.
Business Post reports that a total of 34 stocks appreciated, while 32 stocks depreciated, indicating a positive market breadth index and bullish investor sentiment despite the loss recorded by Customs Street during the session.
By Adedapo Adesanya
Four stocks weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.46 per cent on Friday, May 9, bringing down the market capitalisation by N9.02 billion to N1.935 trillion from N1.944 trillion quoted at the preceding session, as the NASD Unlisted Security Index (NSI) dropped 15.42 points to settle at 3,304.74 points, in contrast to the 3,320.16 points recorded a day earlier.
Central Securities Clearing Systems (CSCS) went down by N1.28 during the trading session to finish at N22.60 per share versus Thursday’s value of N23.88 per share, FrieslandCampina Wamco Nigeria Plc lost N1.00 to close at N40.03 per unit compared with previous closing value of N41.03 per unit, Geo-Fluids Plc depreciated by 11 Kobo to end at N1.81 per share versus the previous session’s N1.92 per share, and UBN Property Plc shrank by 4 Kobo to trade at N1.96 per unit, in contrast to the N2.00 per unit it was sold in the preceding day.
However, the price of Impresit Bakolori Plc went up by 11 Kobo yesterday to close at N1.27 per share versus the previous day’s price of N1.16 per share.
The volume of transactions went down on Friday by 33.1 per cent to 231.6 million units from the 346.3 million units recorded a day earlier, the value of trades decreased by 31.3 per cent to N606.4 million from N882.8 million, while the number of deals increased by 256.3 per cent to 57 deals from 16 deals.
At the close of trading activities, Impresit Bakolori Plc remained the most active stock by volume (year-to-date) with 533.9 million units worth N520.9 million, followed by Geo-Fluids Plc with 265.8 million units valued at N469.5 million, and Okitipupa Plc with 153.6 million units sold for N4.9 billion.
Similarly, Okitipupa Plc was the most traded stock by value (year-to-date) with 153.6 million units worth N4.9 billion, trailed by FrieslandCampina Wamco Nigeria Plc with 19.9 million units valued at N765.5 million, and Impresit Bakolori Plc with 533.9 million units sold for N520.9 million.
By Adedapo Adesanya
The Naira was relatively flat against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Friday, May 9, though it marginally shed 0.2 per cent or 7 Kobo to settle at N1,609.64/$1, in contrast to the preceding day’s N1,609.57/$1.
Also, the Nigerian Naira traded flat against the Pound Sterling and the Euro in the official market during the session, remaining unchanged at N2,145.48/£1 and N1,818.42/€1, respectively.
In the same vein, the value of the domestic currency to the Dollar remained unchanged in the parallel market yesterday at N1,625/$1, according to data obtained by Business Post.
As for the cryptocurrency market, it remained positive as President Donald Trump announced a comprehensive trade deal with the UK and the cumulative inflows into the spot exchange-traded funds (ETFs) hit a record high above $40 billion.
According to market analysts, this has led to substantial liquidations of bearish short positions, or leveraged plays aimed at profiting from price losses. A position is liquidated or forced closed when the trader’s account balance falls below the required margin level, often due to adverse price movements. This leads the exchange to close the position to prevent further losses automatically.
Meanwhile, the US and China are said to be working on a trade deal but many are skeptical of a deal being reached this month.
Dogecoin (DOGE) appreciated by 7.6 per cent to sell at $0.2229, Litecoin (LTC) improved its value by 5.5 per cent to quote at $103.51, Binance Coin (BNB) rose by 4.6 per cent to $663.22, and Solana (SOL) recorded a 3.6 per cent growth to sell at $171.52.
Further, the price of Ripple (XRP) went up by 1.4 per cent $2.37, Ethereum (ETH) jumped by 0.8 per cent to sell for $2,366.49, and Cardano (ADA) gained 0.7 per cent to trade at $0.7952, while Bitcoin (BTC) went down by 0.3 per cent to $103,670.89, with the US Dollar Tether (USDT) and the US Dollar Coin (USDC) trading flat at $1.00 each.
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