Make The Most Out Of Your CFD Trading Account

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Make The Most Out Of Your CFD Trading Account Powered By Docstoc
					CFD trading offers a smart way to manage your money. This helps you in leveraging
your bets and using them to your fullest potential. A relatively small market
movement can produce major changes in your portfolio. But there are some things
that you need to understand in order to be able to manage your account correctly.
  Minimum Deposit: Money lying inside the account does not bear interest. The best
way to use you money in this case is to keep as less money in your CFD trading
account as possible. The best way is to move funds electronically when you are
trading to your account. This way you get the best of both worlds, the interest from
your bank account as well as the leverage from CFDs. To do this, you must have a
CFD account provider that permits zero balance in the account.
  Understand Withdrawal Procedures: Similarly capital gains must be moved to the
account where they bear interest. Please make sure that there are no charges for
making withdrawals as you may lose valuable interest if you are stuck with the money
in your CFD account.
  Understand Your Risk Appetite: CFD accounts are highly leveraged and as such
provide facilities according to the customers risk appetite. There is a feature which
provides guaranteed execution of the order at the market price which had been entered
into the computer. This service is at a premium since it risked your downside. On the
other hand there is a standard service where transaction costs are much lower. It is in
an investor's best interest to understand these options and to pick what he/she wants.
Many investors have lost a lot of hard-earned money to the simple ignorance of these
facilities.
  Understand the Bid Offer spread: CFD trading is a kind of derivatives contract. Such
trading generally happens off the market and requires the investor to part with a
bid-offer spread. Alternatively some big market makers allow the customers to place
their order at the market price without any spread. This makes it identical to trading
on the exchange albeit with a leverage.
  Features: Many of these trading platforms allow advanced features for research,
which is not available to the retail buyer. The buyer can understand the liquidity on
both sides of the position before making a bit. This is generally a good indicator of the
loss of value that may happen in case of a quick sale. The higher the liquidity, the
lower the risk.
  Security: Although it is not advisable to keep the funds in the trading account, but it
is nonetheless safe. Most of these accounts are held in possession of a trust, which
makes sure that the money is safe and provides risk mitigating mechanisms equivalent
to, if not better than the market itself.
  CFD trading helps you leverage your positions at rock-bottom transaction costs. The
famous investor Warren Buffet is also famous for his apprehension of transaction
costs. CFDs help solve a bit of the problem, by lowering them if not eliminating them
completely.
  www.igmarkets.com.sg is a good resource to get more details about a CFD trading
account and all about the risks and rewards involved with CFD as an instrument.

				
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posted:2/23/2011
language:English
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