Main benefits of CFD trading
Possible to trade with small capital
While for trading on the stock exchange you need capital in the order of tens of thousands to hundreds of thousands, for trading on Forex (and other CFD products) the amount of initial capital for opening an account is in the order of thousands (for Purple Trading it is 100 €).
High diversity of tradable assets
In addition to a large number of currency pairs, Forex brokers also offer stock indices, commodities (gold, silver, oil) and cryptocurrencies. The trader does not have to focus on only one market but can diversify his portfolio exactly according to his ideas.
Possibility to speculate on both price increase and decrease
Unlike stockholders, a CFD trader does not have to worry about falling asset prices. Sometimes it’s quite the opposite. If you are sure that the market is in a bad shape and will continue to be for some time which means that prices will fall, you have the opportunity to simply speculate on its decline and make money on it.
Financial leverage trading
Leverage determines the ratio of the amount of capital you invest in a given trade to the funds provided to you by the broker. Basically, this means that the broker will provide a certain amount for each trade, which you will then be able to use only in trading. This will allow you to operate at a larger volume than with your own account balance.
Within EU regulated brokerage firms, this leverage is usually 1:30. In practice, this means that if you invest EUR 1,000, you will have EUR 30,000 available to invest. It sounds really tempting, but you need to realize that leverage can lead to both higher profits and higher losses. This is especially true for novice traders.