How Share CFDs Allow You to Trade Both Rising and Falling Markets
The feature that greatly attracts traders to Share CFDs is that it enables traders to take advantage of both up and down moving markets. This flexibility is a major advantage over traditional stock trading, wherein we can only profit from rising markets. Through Share CFDs, traders can take advantage of market movements going either way, giving more trading opportunities.
In trading Share CFDs, you can go long or short with the position. A long position is a position where you buy a contract with your expectation that the price of the underlying asset rises. It’s similar to traditional stock trading, when you buy shares on the expectation they will go up in value over time. You would sell when the price of the asset rises, in the same way as traditional stock trading. The difference is, however, that Share CFDs have one more benefit: traders can also gain when the market falls.
Taking a short position, traditionally known as short selling, is what has allowed traders to make money from falling markets. This means you are doing the opposite and essentially selling a CFD contract that, in the future, you believe the price of the underlying asset will decrease. Buying back the contract at a cheaper price as the price drops will allow you to pocket the difference. One of the main reasons Share CFDs are attractive to traders who wish to capitalize on every market movement, not just on the up, is their ability to trade on falling markets.
The availability of such versatility in rising or falling market trading presents a lot of options to traders. For example, if a trader thinks a stock’s price is going to fall, they will sell a CFD in order for them to profit from a price drop, even if they do not own the underlying asset. Conversely, if they think that a stock’s value will go upwards, they can purchase a CFD to earn a profit from a price increase. This ability to switch between these two roles allows traders to suit market conditions as and when the opportunities arise.
In volatile markets, where the prices change rapidly, the ability to trade both ways is invaluable. In such a hostile environment, stock traders will find it difficult to reap profits from stock price movements over a short period of time. In contrast, Share CFDs allow you to benefit from such price movements, whether upward or downward. As a result, Share CFDs is an ideal choice for traders that love the pace and lack of order in fast-moving markets.
Furthermore, while Share CFDs allow you to profit in a rising market, they also provide the benefit of leverage, which means you’re able to gain greater profits when trading both rising and falling markets. Traders gain leverage to control a large position with a smaller initial investment, which is the key to higher profits. However, leverage carries increased risk, so traders must use it judiciously, supported by solid risk management.
Share CFDs have the potential to help traders make money on both rising and falling markets; something traditional stock trading doesn’t necessarily offer. Share CFDs offer you a way to trade in any market condition whether to take advantage of a bullish pattern or to capitalize on a bearish move. Knowing how to utilize this flexibility can help traders significantly increase the odds of winning and get the best possible out of each opportunity in their hands.
