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Bài học 7: Advantages and Disadvantages of Broker

Advantages and Disadvantages of CFD Brokers.

In this topic, we will analyze the advantages and disadvantages of CFD trading, help you understand the essentials of investing, and consider the appropriate trading format for you.

 

Advantages and Disadvantages of CFD Brokers.

Advantages:

  • The low transaction costs

CFD trading has low entrance fees for investment deposits and extra fees for trading holding positions. Thus, CFD trading is easily accessible. 

 

  • Very high liquidity

In trading CFDs, asset prices are referenced directly from the market, making them highly liquid. Traders can access the best prices from the liquidity of this underlying market.

 

  • Market Accession

CFD brokers have connections with financial markets and other assets, which help traders make other markets easily accessible and quickly; thus, brokers also have extensive networks, enabling traders to access a wide range of products.

 

  • A wide range of products can be found on one platform

CFDs Broker offers all major products available on global markets, thus allowing traders to invest in trading assets available in markets worldwide. It is accessible 24 hours a day.

 

  • Easy, convenient, and fast trading

CFDs are direct trading between traders and brokers. They allow traders to access asset trading tracking easily and without waiting for the status because they have an automatic trading system; moreover, they are convenient to make transactions.

 

  • CFD brokers offer a wide selection of options

Therefore, there is relatively high competition. This has a positive effect on traders to get low fees and great innovation.

 

  • Providing convenient investment tools

CFDs Broker has an easy-to-use trading platform and offers features such as copy trade, robot trade, and AI to help traders trade comfortably.

 

  • No stamp duty is charged

Assets available in the form of CFDs are financial products that are derived from an underlying asset. The trader does not own the asset, so stamp duty is not charged.

 

  • Trade assets from uptrend and downtrend

Traders can trade assets to speculate on the rise and fall of asset prices, or you can choose to invest from both Buy/Sell.

 

  • Using leverage

Leverage allows traders to invest a small amount of money and acquire a larger number of units. The trader's amount is invested as collateral to trade assets and gain a position in holding more assets.

 

 

Disadvantages:

  • Risk of Fraud

Due to the emergence of many new CFD brokers, some untrustworthy, it is essential to choose a regulated broker, such as one with a license.

 

  • Fees

 When investing with a CFD broker, traders must pay the broker fees for services such as spreads and overnight fees.

 

  • Not suitable for long-term investment

Investment with a CFD broker is not suitable for long-term investment because CFD trading does not give traders their own underlying asset.

 

  • Risk of leverage

CFDs often use leverage to increase the power of holding assets and allow traders to take larger positions. Therefore, traders have a higher risk of losing more than the amount of money they have in their account if they use CFDs without understanding.

 

  • Lack of regulation

CFD trading is not a strictly regulated investment platform. The reliability of CFD brokers is not determined by government status or liquidity but by reputation, age, and financial stability. Therefore, it is essential to research a broker's history before creating an account.

 

  • Volatility from liquidity

CFD trading is highly volatile in the market, thus impacting the assets. For example, asset prices may fluctuate more than traders expected, or spreads may widen, affecting the price and increasing losses.

 

 

A comparison table between CFDs and stocks is used to provide traders with a clear understanding.

Properties

CFDs

Stocks

Ownership

No

Yes

Leverage

Yes

No

Range of market

Multiple markets

Stocks and ETF

Costs

Spread & Rollover

Commission

Trading hours

24/5 (some assets)

During Stocks exchange opening

Dividends

Yes via a cash adjustment

Yes

Losses

Losses capped at amount invested

Losses capped at amount invested

Voting right

No

Yes

Liquidity

High

Lower than CFD

 

 

Warning:

CFD trading is highly risky, and your investment may be completely lost. Please research the information and risks before deciding to invest.