There is no denying the fact that finance and market derivative products are seeing a big surge in demand. These are entirely driven by technology and they do offer a chance for small traders to make money. This is because there are some unique features about the CFD products which make it easy to even get started with minimum investment. Hence it would be pertinent to have a closer look at the product and understand more about the features of the product. Further we will look at the future and also try to learn about the career and job prospects for specialists who would like to concentrate on CFD as a financial derivative.
Basics Of Contract For Differences CFD
Put in plain and simple words it is an arrangement made for a future contract. The differences in settlement are usually squared off through cash payments, instead of delivery of securities and physical goods. This has been found to be an easier method of settlement because cash payment is always a much better option. Apart from the above there are a few more advantages which go a long way in making CFDs a great option for small time investors.
A Few Reasons Why It Could Be A Future Game Changer
One big reason why CFDs could have a good future is because they offer a higher leverage when compared to traditional trading. The leverage in any standard CFD market is only 2% as far as margin money requirement is concerned and the returns could be as high as 20%. Because of lower margin money requirements even traders with low investment and capital outlay will be in a position to get into it. Hence the chances of better return for the small traders are that much higher when compared to conventional trading. It is possible to get started with a capital outlay of just around $1,000. Further since CFDs are a reflection of the performance of the corporate and other vital sectors of the economy, owners of CFDs would be entitled to receive dividends and other such bonuses from the corporate sector. It is also possible to take part in stock splits, thereby increasing the chances of return on investment quite significantly.
Further quality CFD brokers and service providers like CMC markets offer products which cover a wide spectrum of the market and they also offer it worldwide too. It is therefore possible for customers to take part in indices, treasury products, stocks, currencies, commodities and other such financial products. In the absence of short selling rules, it is possible to short an instrument at any point of time. Further since there is no ownership as far as the underlying asset is concerned, the chances of borrowing cost or shorting cost can be safely ruled out.
Disadvantages
On the flip side since there is spread payment involved on entry and exit, big profits from small moves may not always be possible. It is still a business which is not very well regulated and therefore the goodwill and reputation of the broker has a big role to play.
The Job Market For CFD Professionals
It would be not out of place to mention here that CFD is still in its nascent stage and therefore it has a bright future as far as employment opportunities are concerned. It will start growing quite rapidly given the inherent strengths and advantages associated with it. The knowledge level and the regulatory mechanisms need to be tightened a bit and it will certainly happen sooner than later.
There will be a demand for these CFD trading professionals in the banking and finance sectors and the stock market, commodity market, forex dealers and other will also be on the lookout for these professionals in the coming years. However, the need of the hour is the right institutes and other mediums which can offer a comprehensive and complete course on the subject matter. Unless these mechanisms are set in place it may not be possible to tap into the vast employment generation potential which it offers. Further there ought to be an international arrangement by which the right courses can be developed which is uniform and has acceptance across the many countries where CFD has a potential to grow from one level to another.