Both FX trading and CFD trading are margin trading which leverages a small sum of funds to gain a large sum and make a profit from the price fluctuation. Also, they belong to Over-the-counter (OTC) Trading.
Unlike physical trading of stocks and bonds, you can sell short in margin trading, so even when the price declines, you can still earn profits. In other words, you can gain profits not only in a bullish market but also in a bearish market.
High fund utilization rate
Margin requirement in margin trading is only 3-20% of the total trading volume. With high fund utilization rate, it is an efficient type of investment.
Regular FX trading and commodity futures trading can only be carried out in fixed place or futures exchanges, so the trading hours are restricted to the business hours, but FX margin trading, spot gold and spot silver of commodity CFD trading can be done 24 hours. Office workers who are busy at work during the day and cannot trade for the lack of time and convenience can trade after work using online trading system. Moreover, the period from afternoon to midnight HK time is the trading period in Europe and America when the prices fluctuate more actively and the trend becomes clearer, which is more favorable for trading.
In FX and CFD margin trading, the order can be executed at any time only if the client is willing to trade. The pattern of an automatic price-matching transaction and the resulting failure in stock and futures trading will never occurs.
Difficult in Price Manipulation
Because the market size is large, even big positions won’t influence price.
When you hold stock or commodity spots and estimate that the stock price will decline, you can hedge risks of asset depreciation by opening short positions in CFD trading to offset the losses to avoid the risks that you don’t want to sell the spots.
Interest Collect or Pay
In FX trading, if one buys a currency with a higher interest rate and sell a currency with a lower interest rate and holds the position to the next trading day, he/she can collect interest. On the contrary, if one sells a currency with a higher interest rate and buy a currency with a lower interest rate and holds the position to the next trading day, he/she will pay interest. In CFD trading, with the outstanding position of selling gold or silver to rollover, interest should be collected. (It may vary with market conditions.