CFDs, or Contracts for Difference, have become increasingly popular among traders in recent years. This financial instrument enables traders to speculate on the price movements of different assets without possessing the underlying asset itself. Unlike traditional trading, CFDs offer a range of benefits, such as leverage and short-selling options, making them an attractive alternative for diversifying their portfolios. This article will discuss why traders should consider venturing into CFDs in Singapore.
Access to global markets
One of the main advantages of trading CFDs in Singapore is the access to international markets. As a significant financial hub, Singapore allows traders to trade on various asset classes worldwide, including stocks, indices, currencies, commodities, and even cryptocurrencies.
With CFDs, traders can speculate on the price movements of these assets without having to own them physically. Therefore, traders can quickly diversify their portfolios and exploit market opportunities in different regions and sectors.
CFDs also allow for trading on margin, meaning traders can open more prominent positions with a smaller amount of capital. This leverage can amplify profits, but it is important to note that it also increases the potential risk of losses. As such, traders must have a solid risk management plan when trading CFDs.
Lower trading costs
Another reason traders should consider CFDs in Singapore is the lower trading costs than traditional trading methods. When buying and selling stocks or ETFs, traders often pay commissions, exchange fees, and other hidden costs. With CFDs, the only cost involved is the spread, which is the difference between the buy and sell price.
In addition, CFD trading in Singapore is typically commission-free, making it an attractive option for traders looking to keep their trading costs low. It allows traders to potentially maximise their returns without worrying about expensive fees eating into their gains.
Traders should also take note of the competitive pricing offered by various CFD brokers, like Saxo in Singapore. With transparent pricing and low spreads, traders enjoy efficient and cost-effective trading on multiple markets.
Ability to short-sell
CFDs also offer traders the ability to short-sell, which means they can take advantage of falling market prices. It is instrumental during bearish market conditions when traditional investors may struggle to make potential returns.
Short-selling allows traders to take advantage of market downturns by selling an asset they do not own and repurchasing it at a lower price, thus potentially making a profit from the difference. This powerful strategy can be used to hedge against potential losses or speculate on market movements.
However, traders must understand short-selling risks and techniques before engaging in this strategy. It is also recommended to have a stop-loss in place to limit potential losses.
Flexibility with position size
CFDs offer traders the flexibility to control their position size, allowing them to trade in smaller increments than traditional trading methods, meaning traders can enter positions with smaller capital and benefit from the potential profits.
With CFDs, traders can also trade in fractional units, especially for expensive assets such as stocks. It allows traders to diversify their portfolios without needing much capital.
A Saxo CFD broker in Singapore allows traders to trade on fractional shares, making it easier for investors to access a broader range of assets. It also offers competitive margin rates, making it an ideal option for traders looking to potentially maximise their capital.
Advanced trading platforms
Trading CFDs in Singapore also provides traders with access to advanced trading platforms. These platforms offer various features, including real-time market data, charting tools, and risk management options.
With these platforms, traders can make informed decisions based on market analysis and stay updated with the latest news and events that may impact their trades. They can also customise their trading strategies and execute trades quickly and efficiently.
You can access Saxo’s award-winning platform, SaxoTraderGO, when using a Saxo CFD broker. This user-friendly platform offers advanced charting and trading tools and a wide range of educational resources to help traders improve their skills.
Traders should consider venturing into CFDs in Singapore due to the regulatory protection offered by the Monetary Authority of Singapore (MAS). The MAS regulates all financial activities in Singapore, including CFD trading, ensuring that brokers adhere to strict guidelines and best practices.
It provides security for traders as they know their funds are held in segregated accounts and are protected by compensation schemes. In addition, MAS-regulated brokers must provide transparent pricing and risk disclosures to their clients, ensuring fair and ethical trading practices.
It is essential for traders to only trade with regulated brokers, as they offer a level of security and protection that unregulated brokers do not, making CFD trading in Singapore a safe and reliable option for traders.