A CFD refers to contracts that are not directly linked to any underlying asset and can be used to trade the price variations of assets without taking ownership of them.
Instead, when you trade a CFD, you agree to exchange the difference in the price of an asset between the time the contract is opened and closed. One of the main plus points of CFD trading is that you can speculate on both up and down movements in price, with your profit or loss depending on how accurately your prediction compares to reality.
The popularity of CFD trading has grown exponentially in recent years. This is due to the many benefits that CFDs offer, such as the ability to trade on margin and the fact that they are not subject to stamp duty. However, with this popularity has come an increase in the number of assets traded via CFDs.
Commodities
One of the most popular asset classes for CFD trading is commodities.
A commodity is a raw material used to manufacture finished goods. A raw material used to produce finished goods is a commodity, and a product is a completed good sold to customers. Both commodities and finished goods are part of the production and manufacturing process, except they are located at different places in the chain.
Commodities offer a high degree of price movements, providing traders with ample opportunities to profit. Some of the most popular commodities traded via CFDs include gold, silver, oil, and copper.
Indices
Another sought after asset class for CFD trading is indices. Indices measure the price-performance of a set of equities from an exchange.
This is because indices offer an excellent way to diversify one’s portfolio, as they provide exposure to a basket of stocks rather than just one company. Some of the most popular indices traded via CFDs include the Dow Jones Industrial Average (DJIA), the S&P 500, and the NASDAQ Composite.
Currencies
Another popular asset class for CFD trading is currencies. Currencies offer a high degree of price movements, providing traders with ample opportunities to profit. Some of the most popular currencies traded via CFDs include the U.S. dollar, the British pound, the Japanese yen, and the Euro.
Stocks
Stocks are another popular asset class for CFD trading. A stock is a form of investment in a firm. Companies offer stock shares to raise cash to meet operational needs and grow, and investors buy those stock shares to earn a return on their money.
They are trending because stocks offer a high degree of price movements, providing traders with ample opportunities to make profits. Some of the most popular stocks traded via CFDs include Apple Inc. (AAPL), Facebook Inc. (F.B.), and Google Inc. (GOOGL).
ETFs
Another popular asset class for CFD trading is ETFs.
ETFs, or ‘exchange-traded funds’, are mutual funds that trade on exchanges. They’re exactly what the name implies: funds that change hands on exchanges, generally tracking a specific index. You get a collection of assets when you invest in an ETF, allowing you to buy and sell them during market hours—possibly lowering your risk and exposure while diversifying your portfolio.
ETFs offer an excellent way to diversify one’s portfolio, as they provide exposure to a basket of assets rather than just one. Some of the most popular ETFs traded via CFDs include the SPDR S&P 500 ETF (SPY), the iShares MSCI Emerging Markets ETF (EEM), and the PowerShares QQQ ETF (QQQ).
Cryptocurrencies
One of the newest asset classes to be traded via CFDs is cryptocurrencies. Cryptocurrencies are encrypted digital or virtual currencies. This is a new type of digital currency in which users may trade their real money for the U.S. dollar and purchase items in the internet marketplace.
Cryptocurrencies have seen a massive surge in popularity in recent years due to their volatile nature and the fact that they are not subject to government regulation. Some of the most popular cryptocurrencies traded via CFDs include Bitcoin, Ethereum, Litecoin, and Ripple.
To sum it all up
The most popular assets traded via CFDs are commodities, indices, currencies, stocks and cryptocurrencies. With the global reach of CFDs and their ability to offer exposure to various markets, their popularity is unsurprising. CFDs come with unique risks that investors should consider, but they can also offer a lucrative investment chance when utilized correctly.