The financial market is full of opportunities, but you need to know how to trade the right way to get yourself a better chance for success. One of the best ways to do that is by using contracts for difference or CFDs (browse this site for more info). However, you must understand why this type of investment could benefit your situation. Here are eight reasons why you should consider investing with CFDs in Singapore:
Risk management
CFD trading could provide you with an easy way to manage risk. You can use them to take advantage of all kinds of price fluctuations without having to put up any collateral or make any cash outlay when you open a position. It goes hand in hand with diversification which limits losses and enhances returns.
Low minimum investment
One of the reasons CFDs are becoming increasingly popular with Singapore traders is that you don’t need to make a substantial initial investment to get started. It also allows small investors or novice traders to try out this type of trading without risking too much capital. Most brokers enable you to begin trading only after depositing only S$200.
Great volatility
The volatility associated with CFD trades is one of the main attractions for most people who invest in them. You can use extreme price fluctuations in your favour by investing when it goes up and then selling when it drops back down again. As long as you can forecast a rise or fall accurately, this could be an effective way to make money.
No tax implications
Another significant aspect of using CFDs is that you won’t have to worry about having any tax implications. Singapore traders are usually responsible for paying capital gains taxes on their cryptocurrency trades, but this isn’t the case for different contracts. You should keep in mind that this doesn’t apply if your CFD broker holds a Type 4 Financial Advisor license from MAS and will advise you on which trades to make.
High liquidity
Liquidity is a crucial factor in any investment because it determines how fast you can get into or out of a trade without having to accept significant losses due to slippage. The liquidity associated with CFDs is one of the most significant benefits for Singapore traders because it allows them to quickly get in and out of a position. This further increases your chances of capitalising on short-term price fluctuations.
High leverage
Many people use high leverage when they invest in boosting your trading potential. At times you may be able to increase it as much as 200:1, which means that a small investment could potentially generate a massive return over time if you know what you’re doing. It will help if you remember that this also means that any losses will have an even more significant effect on your capital base. It would help if you were careful about how much risk you take with your investments and only open trades that you’re confident will be profitable.
Wide range of instruments
Since CFDs are traded on margin, you can open positions with a wide range of different tools. It means that you can take advantage of all kinds of price fluctuations to enhance your returns or mitigate risks if necessary. You could trade commodities, cryptocurrencies, indices, stocks and even foreign exchange rates using this type of trading strategy.
Diverse profit opportunities
Since the financial markets are constantly changing, there’s always more than one way to make money when using CFDs. When the market goes up or down, you’ll always have diverse ways to profit from it without having to purchase physical stock unless you want to do so. It gives you a lot more freedom to make decisions and increases the chances of profit in the long run.
