One of the fastest-growing forms of derivative trading, CFD trading, enables you to trade in several different markets and financial instruments around the globe. CFD investors regularly trade indices, stocks, commodities, currencies, and Forex, among other financial instruments, so there are plenty of opportunities for trading in your specific field.
However, with a large number of companies providing CFD trading south Africa, there are many for beginners to choose from too. Before you begin to trade, here are some things that can help you decide which for beginners are the best options:
For CFD investors, stamp duty is one of the biggest concerns and it’s essential to know what stamp duty is before you start trading. This is an annual tax of up to 5% on the value of any financial assets.
This tax is only charged on properties and assets that have a current value, but it can be calculated based on the price of the property when it was bought. A good rule of thumb is to take into account the current market value of your investment capital before calculating your stamp duty obligation.
The next thing you should look for when looking for a CFD broker is whether they offer margin trading. This means that you will have the capacity to purchase more shares than you need to pay out each month to ensure that your profit margin is maintained.
If you only intend to use a single or a limited number of shares, this may not be necessary; however, if you intend to trade in a variety of shares, this can be very profitable for beginners. It’s essential to find out what your broker offers in terms of leverage before you decide whether to use this service.
You must also take into account the broker’s level of experience. There are many experienced traders out there who will offer very low-leverage investments, but these are usually at a disadvantage when it comes to dealing with market turbulence or sudden price movements.
To minimize your losses during times of market turbulence and fluctuations, experienced traders will hold onto their investment capital for longer periods. CFD brokers should be willing to hold onto investment capital for as long as is required for you to minimize your losses, but at the same time, they must make sure that they don’t get stuck with large losses that they can not afford to cover themselves. Look for an experienced trader with good knowledge and proven experience when choosing a broker to help manage your CFD portfolio.
It’s also important to find out what types of CFD products are available from the broker you choose. Some types of CFDs are traded in different markets than others. Some CFD products are traded on commodity exchanges such as Commodities Futures Exchanges and Derivatives Exchange Areas, while some CFDs are traded in the Financial Districts and Brokerages.
This can be a confusing array of markets, so it is best to understand the differences between the different types of CFD trading before deciding which type of CFD broker would be best for you. A good CFD broker will explain the different types of CFDs to you so that you can choose the ones that will suit you best!