The different CFDs you can trade in Australia
When it comes to trading contracts for difference (CFDs), there is a wide range of potential markets and products to choose from. In Australia, cfd providers offer their clients the ability to trade on indices, shares, commodities, foreign exchange (forex) and even cryptocurrencies.
What is a CFD?
A contract for difference is a derivative instrument that allows traders to speculate on the price movements of underlying assets without actually owning the asset itself. For example, if you believed that the share price of company ABC was going to increase, you could open a long CFD position and profit from the upward price movement. Conversely, if you thought the share price would fall, you could open a short CFD position.
Benefits of trading CFDs
There are several benefits to trading CFDs, including
Flexibility
You can trade CFDs on various assets, including indices, shares, commodities, forex and cryptocurrencies.
Leverage
You can trade with a much higher level of leverage than is available when trading stocks or forex.
Lower capital requirements
You don’t need to invest as much money to open a CFD position as you would need to buy the underlying asset outright.
Risks associated with trading CFDs
However, there are also several risks associated with CFD trading, including
- the potential for high losses if the market moves against you
- the inability to trade out of a losing position as there may be no buyers willing to take on your trade
- the high level of leverage involved can magnify both profits and losses.
What CFDs can you trade in Australia?
In Australia, you can trade a wide range of CFDs, including indices, shares, commodities, forex and cryptocurrencies. Let’s take a closer look at each of these markets in turn.
Indices CFDs
An index is simply a basket of individual stocks that are used to measure the performance of a particular market or sector. For example, the ASX 200 is an index that tracks the performance of the top 200 companies listed on the Australian Securities Exchange.
Some of the most popular indices that you can trade as CFDs in Australia include
- the ASX 200 (Australian Securities Exchange)
- the Dow Jones Industrial Average (US)
- the FTSE 100 (UK)
- the Nikkei 225 (Japan)
- and the Hang Seng Index (Hong Kong).
Shares CFDs
A share is a unit of ownership in a company. When you buy shares, you become a shareholder in that company and are entitled to a share of its profits or losses. In Australia, you can trade CFDs on shares listed on several exchanges, including the Australian Securities Exchange (ASX) the Nasdaq Exchange (ASX).
Commodities CFDs
A commodity is a physical item used to produce or obtain other goods or services. Commodities can be divided into two categories: hard commodities and soft commodities.
Hard commodities are typically mined or extracted from the earth, while soft commodities are grown or raised. Some of the most popular hard commodities include gold, silver, copper and oil, while some of the most popular soft commodities include grains (corn, wheat, rice), livestock (cattle, pork) and sugar.
In Australia, you can trade CFDs on hard and soft commodities. The most popular hard commodities include gold, silver, copper and oil. The most popular soft commodities include grains (corn, wheat, rice), livestock (cattle, pork) and sugar.
Foreign exchange (forex) CFDs
Forex is the global market where currencies are traded. Currencies can be bought and sold in pairs, with each trade involving the purchase of one currency and the sale of another.
In Australia, you can trade CFDs on a range of forex pairs, including the US dollar/Australian dollar (USD/AUD), Euro/Australian dollar (EUR/AUD) and British pound/Australian dollar (GBP/AUD)
Cryptocurrency CFDs
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. The most well-known cryptocurrency is Bitcoin, followed by Ethereum and Litecoin.
In Australia, you can trade CFDs on various cryptocurrencies, including Bitcoin, Ethereum and Litecoin.
Final word
Ne traders interested in CFD trading in Australia are advised to use a reliable and experienced online broker from Saxo Bank and trade on a demo account before investing real money.
