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The difference between CFD and futures trading in Sydney


There are a few different options available to investors when it comes to trading. One of these is CFD (contract for difference) trading, and another is futures trading. Both the investment options have their advantages and disadvantages, so it can be challenging to decide which one is right for you. In this article, we will look at the differences between cfd and futures trading in Sydney.

CFDs vs Futures

There are several key differences between CFDs and futures:

CFDs are traded over the counter (OTC), while futures contracts are traded on exchanges

The key difference between CFD and futures trading is that CFDs are over the counter (OTC) products, whereas futures are traded on exchanges. This means that with CFDs, you deal directly with the broker, whereas with futures, you trade through an exchange. This gives you more control with CFDs, as you can choose your broker, and you don’t have to go through the exchange. However, it also means a greater risk with CFDs, as the broker may not be as reliable as an exchange.

CFDs are much more leveraged than futures contracts

This means that you can trade a much more prominent position with a CFD than you could with a futures contract. For example, if you have $1,000 in your account, you could trade up to $100,000 worth of CFDs. With futures contracts, the maximum position size would be much smaller.

Futures are traded on a margin

With futures trading, you can trade on margin. This means that you can trade more prominent positions than you would be able to with cash. This can be risky, but it also allows you to make larger profits if your trade is successful. Futures contracts are also standardised, which means that they are traded on an exchange, and everyone knows the terms and conditions of the contract.

CFDs are not standardised

CFDs are not standardised, which means that the terms and conditions of each contract can vary, and this can be both good and bad; on the one hand, it gives you more flexibility, but on the other hand, it can be more challenging to understand the contract. CFDs are also not marginal, which means that you cannot trade on margin, and you need to have the total amount of money to cover the position.

With CFDs, you can trade on price movements

CFDs, or contracts for difference, allow investors to trade on the price movements of assets without actually owning them, and this can be a good option for those who want exposure to certain markets but don’t want to buy the underlying asset. However, CFDs are also riskier than other types of trading as they involve leverage. This means that investors can lose more money than they initially invested if the market moves against them.

With futures, you can lock in the price

On the other hand, futures contracts are agreements to buy or sell an asset at a specific price on a specific date in the future. This allows investors to lock in a price and protect themselves from potential price movements. However, futures contracts also come with risks, such as the potential for margin calls if the market moves against them.

Expiration date

Futures contracts expire on a specific date, so you need to be aware of the implications if you hold a position overnight. For example, if the market moves against you when your contract expires, you could lose all of your money.

Bottom Line

So, which one is right for you? If you are looking for greater control and want to deal directly with the broker, CFDs may be a better option. If you are looking for greater flexibility and want to trade on margin, futures trading may be better. Whichever investment option you choose, make sure you do your research first to understand the risks involved. New traders interested in australia cfd trading are advised to use an experienced and reliable broker from Saxo Bank.


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