The second most popular currency pair in
the Forex market is a stock exchange instrument called CFD. Currently, CFD
contracts on Forex offers to trade most brokers of the foreign exchange market.
What is this tool and what its features - this is what we will talk about in
this article. So, what is CFD on Forex?
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CFD contracts in
the Forex market are contracts for the difference in prices of the underlying
asset, which can act as shares of a company, a particular stock index, etc.
When dealing with CFDs on Forex, you can say, do not deal with the currency,
but with the stock market, but at the same time avoid unnecessary bureaucracy
and take advantage of the advantages inherent in the currency market. In
particular, this is the case.
As in the foreign exchange market, when
trading CFD contracts, your broker will provide you with increased leverage -
accordingly, having a very small amount in the account, you will be able to
operate positions larger than it would be available to you stock market.
However, it should be taken into account that you will have to pay for the
leverage. After all, it represents nothing but a loan that the broker provides
to buy a financial instrument. Therefore, as in the case of currency pairs, if
there are open positions from your account, a certain amount for the use of
this loan will be debited daily.
You will not have to deal with the red
tape inherent in the stock market. In particular, you will be able to trade CFD
contracts through a Russian broker without being a citizen of the Russian
Federation or if you are a citizen of other countries. You will also be given
greater leeway in the tax process.
Dividends. Strictly speaking, trading
CFD contracts on Forex, you are not the owner of certain shares and,
accordingly, are not entitled to receive dividends from the issuing company.
However, most Forex brokers currently consider the size and timing of
shareholders' dividends and conduct appropriate settlements with their CFD
clients. That is, financially, it will most likely not matter to you whether
you buy real shares of any company or whether CFDs contract to change these
shares' price. Dividends or their equivalent, you will still get.
At the same time,
it should be considered that the stock market trader is legally protected much
more than the client of the Forex broker trading CFD. After all, what are CFD
contracts on Forex inherently?
In our opinion, bona fide brokers, who
also offer quite attractive terms of trading CFD contracts, are particularly RoboForex
Stocks and InstaForex. If you are interested
in working in the CFD contract market, take a closer look at these
organizations.
Thus, we can note
that CFD on Forex. is a fairly interesting financial tool,
allowing any trader to try his hand at the stock market without having large
sums of money and not facing serious bureaucratic procedures.