CFDs CFDs make shorting stocks much cheaper

CFDs make shorting stocks much cheaper

CFD brokers allow traders to go both long and short in various financial markets. One of the places that this becomes much handier is in individual stocks. The CFD broker allows you to trade with a much smaller amount of margin than the standard stockbroker will. In fact, some stock brokers won’t even allow you to short sell, or you may find various other problems with trying to do so.

Margin is a major issue when it comes to shorting stocks, because some stockbrokers will make you carry 100% margin. In other words, if you are trying to short $8,000 worth of stocks, you need to keep that amount of margin in your account. Others will ask for 50% of the position. So, with an $80 stock that you are trying to short, you will have to do so with at least 100 shares. That is the figure I use to come up with the previous $8000 example. Think about that for a while, because if you must come up with 1000 and margin, that ties up a massive amount of trading capital.

However, if you are using the CFD broker, it may be as little as 3%. That allows you to trade many more positions than with one of the larger typical brokers. Beyond that, one of the major issues that you have is that the stock you want to start selling my not be able to be traded. You must borrow stocks in order to short them, and not all stocks are available, or perhaps might be difficult to combine. By using the CFD market, you avoid all of those issues in simply take advantage of the price movement more than anything else, and that of course is the essence of which are trying to do. Simply put, shorting a stock through the CFD market makes much more sense.

The post CFDs CFDs make shorting stocks much cheaper appeared first on The Diary of a Trader.