CFDs are still a relatively new trading tool in the market, and it can be used in global markets。However, various countries have different legislation on financial transaction instruments, this article is for your reference。

Countries where CFDs can be traded

CFDs are currently traded in listed and so-called "over-the-counter" markets in many major trading countries, including:

United Kingdom, Germany, Switzerland, Singapore, Japan, Australia, Spain, France, South Africa, Canada, New Zealand, Sweden, Norway, Italy, Thailand, Denmark, Netherlands, Chile, Israel, United Arab Emirates, Cyprus.

Although CFDs are not permitted in the United States due to the Securities and Exchange Commission (SEC) restrictions on over-the-counter financial instruments, non-U.S. residents may use CFDs to trade。

What is a contract for difference？

A contract for difference (CFD) is a type of financial derivatives transaction in which the difference between the opening price and the closing price is settled in cash.。CFD is an advanced trading strategy used by experienced traders and is not allowed in the US。

CFDs allow traders to trade based on changes in the price of securities and derivatives, which are financial investments derived from the underlying asset。Essentially, CFDs are used by investors to make price bets on whether the price of the underlying asset or security will rise or fall。

How CFD Trading Works？

There are four key concepts you need to understand before investing in CFD trading。

Point difference

With CFD trading, you will always get two prices based on the value of the underlying instrument: the buy price and the sell price。The buy price will always be higher than the current underlying value and the sell price will always be lower than the current underlying value, the difference between these prices is called the spread。

Contract Size

The size of contracts traded in CFDs depends on the underlying asset。In derivatives trading, the underlying asset is the financial instrument represented by the derivative and the factor that gives the derivative value.。

For CFD stocks, the contract size usually represents one share of the company you are trading in.。For example, to open a position simulating the purchase of 500 Ambank shares, you would need to purchase 500 Ambank CFDs。

Duration

One of the main points of trading CFDs is that they have no expiration date and only close positions when trading in the opposite direction。For example, a position to buy 500 gold contracts can be closed by selling 500 gold contracts.。

gains and losses

Profits and losses can be easily calculated by a simple formula。The number of contracts you hold multiplied by the spread, minus any fees you pay in order to fully calculate the profit or loss on the trade。

Profit and loss = number of CFDs x (closing price - opening price)

Traders of CFDs

When CFDs first came into play, they were only really used by market makers of listed stocks because they were the only institutions allowed to short securities。This is why CFDs have become an "over-the-counter" product for institutional traders, and large companies are the only ones that can take advantage of this revolutionary financial instrument.。

Later in the century, private customers and retail marketplaces were able to join Gerrard & National Intercommodities through the online trading division。This trading system, which allows private clients to trade directly on the London Stock Exchange via the internet, is an innovation and a precursor to the way many CFD traders operate today.。

The CFD revolution is now underway, with individual investors trading their own accounts, small fund managers and institutions joining the circle and enjoying the same benefits。The new level playing field has greatly facilitated the adoption of CFDs, and the ability to leverage trading is seen by many as a major attraction。

Advantages of Trading CFDs

1.Flexibility and transparency

CFDs are popular with private investors of all sizes because the flexibility and transparency inherent in their use allows for a highly personalized form of investment.。In fact, CFDs have been one of the fastest growing financial trading products available to private investors over the past decade.。

The many advantages of margin trading and the profit from the rise and fall of asset values in an extremely diverse market are factors in the widespread use of CFDs。

2.Leverage and Cost

CFDs are much more leveraged than traditional trading。In traditional trading, traders must put 100% of their money into the trade if they want to open a position, but in CFDs, if they spend £50 to open a £1,000 position, the brokerage firm charges a small fee to cover the difference of £950.。

In addition, CFD trading provides access to the underlying asset at a lower cost than the direct purchase of the asset, ease of execution, and the ability to go long or short。In addition, CFD brokers typically derive income from the daily percentage earned through trading financing。

3.Diversity

Another reason why CFD trading has become a popular trend for investors is its diversity.。You can trade more than 17,000 markets using CFDs, including stocks, indices, commodities, forex, cryptocurrencies, options and more。

Ideally, you can even trade certain markets outside of trading hours to take full advantage of financial information。Keep in mind that the opening price of the market may be different from the after-hours price。

CFD Trading Regulation

For many, CFDs are an operationally efficient tax investment vehicle and CFDs are relatively simple to trade。Currently, in many cases, there is little regulation applicable to the industry, which is another reason for the increase in popularity。

Some industry observers predict that CFDs will become the tool of choice for most global traders at some point in the next decade.。Whether this prediction is correct or not will not affect the relatively rapid rise of this innovative financial product, nor will it affect the fact that many traders around the world use the process to make successful investments。

In the tightly controlled global financial sector, any less regulated area provides investors with greater flexibility。One of the most influential ways is to allow CFD traders to operate across borders, effectively providing 24-hour access to global markets。This has led to many new opportunities, illustrating that more people now than ever before have the opportunity to participate in a wide range of market transactions.。

CFDs Global Markets

This global factor is one of the driving forces behind the growing popularity of CFD trading。Since there are literally thousands of markets available to establish CFD positions, expertise in the stock market, commodity exchanges or foreign exchange trading is not necessarily a prerequisite for success。

This means that DIY investors now have easy-to-use strategies and methods, such as following news stories and using ready-made technical data to create charts and observe trends.。This, coupled with the "over-the-counter" nature of the CFD brokerage business, has had a truly transformative impact on the nature of trading in global markets。