People have realized that instead of going through all the hassles of trying to purchase properties in Dubai, they can invest their money into CFDs.
Contracts for difference, or CFDs as it is popularly known, are already being recognized as the new trendsetter in investing.
A tool where a trader’s capital never leaves his possession – With a traditional method, if a person uses a margin account, he has the option of borrowing the amount.
However, in CFDs, there is no need to borrow funds, which means that you are not at any risk, nor will your capital be tied up when trading with this method.
In this article, we will look at ten reasons why you should use CFDs in Dubai.
A highly liquid market
With so many brokers offering this facility, it means that one can get fast deals done without having to worry about slippages or whether the order was filled at all.
It makes it very easy for traders to deal with situations whenever they have to trade out of a wrong position quickly and access live prices from anywhere around the world.
A variety of instruments
People who have been investing in shares for years might think that only a few stocks offer good returns.
However, with CFDs, there are many options available to investors. You can trade currencies that might be affected by the EU’s happenings or get into oil shares if you think OPEC is going to lower prices in the future.
No matter your opinion on any particular claim, currency or commodity, there is always an option where you will have some influence over whether the stock/commodity/currency moves up or down.
A low margin requirement
Imagine investing some money and still getting returns of, say, 70% when compared to how much capital was invested?
That would mean that instead of putting in more cash, one can increase his investment ten times just because of the margin.
This can be a massive incentive for a trader to get into the market and make good profits.
No stamp duty
When you traditionally purchase stocks or shares, there is always a stamp duty that one has to pay. This is not applicable when using CFDs as it is considered an instrument of betting.
Lower brokerage rates
Most brokers do not charge a commission for CFDs but only for the spread between the Bid and Ask prices.
This could be anything from 0.1% to 2%. This means that those making money on the trades will not have their profits reduced because of any commission charge that would have been levied on them if they were using other investment options.
No capital gains tax
This is another big incentive as most people with investments usually will have to pay a capital gains tax on whatever profits they make.
For those living in the UAE, this means that whatever income you receive from your investments, you will not be taxed for it.
You can’t lose more than what you invest
This is one of the best benefits and an advantage that is exclusive to CFDs because unless there is a margin call, there is no way that investors will lose more money than what is invested.
Of course, if margins are called, then their positions might be liquidated.
You can use leverage
This is a powerful tool that CFD traders have at their disposal. It allows them to trade in much greater volume than their account balance suggests. For example, if you have an account with a broker with a margin requirement of 1%, you can trade with up to 100 times the amount of your deposit. This gives the trader a lot of firepowers and can result in large profits or losses, depending on how he trades.
No overnight fees
When you hold a physical share, there might be an annual holding fee levied by the company or institution where you have the stock certificate.
With CFDs, this is not applicable as they are considered short-term instruments.
Wide range of markets to trade
The needs available for CFD trading are: indices, currencies, commodities and shares. This is a much more comprehensive range than what is available when trading traditionally.
As mentioned earlier, this is a powerful tool that CFDs offer traders. It allows them to increase the size of their positions and hence profits or losses depending on how the trade goes.
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