In financial investment, there are some who prefer to play the markets without the burden of asset ownership. In other words, they like to find ways to profit off of assets, but would rather avoid taking possession of them. There’s a chance this is becoming an even more popular strategy today.
In recent years we’ve already seen a growing trend towards avoiding the stock market, and given the economic calamity of 2020, we’d expect to see even more people opting not to purchase stocks (or other assets). But this doesn’t mean those people won’t invest at all.
In some cases, they may simply look for other forms of investment. And one that allows for many of the same opportunities as market investment without the pressure and complication of ownership is CFD trading. That abbreviation, for those who aren’t aware, stands for contract for difference. It’s a trading method executed through contracts that enable investors to put money behind assets’ movement, but not the assets themselves. Predict the direction of price movement in a given amount of time, and you can profit from your investment.
It’s certainly an intriguing option for some who are looking for alternative methods. And there are various popular markets in which CFD trading can be conducted.
Forex trading involves, as we have stated before, the buying and selling of currencies for profit. Typically this involves regular trading, leveraging currencies against one another and paying attention to a vast and busy market. With CFD trading though, investors can take a somewhat more relaxed approach, speculating on currency value rather than constantly trading pairs. Additionally, as is somewhat common in forex trading in general, forex CFDs can still be arranged with leverage (which can help to make profits greater).
The commodities market is also a fairly active one for CFD trading. It may be a popular one in 2020 as well, given that some commodities have performed far better than the average major stock or currency. Gold’s trading value, for instance, has been at an all-time high, as the “yellow metal” attracts investors who may be fleeing other markets. Silver, meanwhile, has mimicked gold, and at times in recent months has seen even sharper upticks. But keep in mind, with CFD trading it’s not only positive assets that can yield positive returns. While the price of gold may help an investor to profit with a CFD expecting gains, a commodity that’s struggling — such as oil for parts of this year — can similarly yield a profit on a CFD anticipating a loss. It’s one of the benefits of this form of trading that it can work in either direction.
The stock markets may be what have spooked some investors into seeking alternative methods in the first place. But here, too, CFD trading makes for an intriguing option. Through some CFD brokers online, traders can speculate on the movements of individual stocks much the same way as they might with an asset like gold or a given currency. This still makes for a tricky process in a volatile stock exchange, but some traders find it preferable not to actually own stocks in such a situation.
Bonds almost operate somewhat like CFDs to begin with, but there are some brokers that accept CFD trades on government-issued bonds. And given that the bond market has actually been somewhat encouraging this summer, this might be a particularly appealing stock exchange alternative to some investors. Bond yields have subtly indicated that the worst of the economic crisis may have already passed, which will give some confidence putting their money behind these assets.
Whether CFD trading is the right option for you or not depends on your own investment outlook. For some, it’s an exciting opportunity and an attractive alternative; for others, a challenging or unfamiliar idea. But if you’re curious about this form of investment, these are some of the markets in which you can give it a try.