CFDs

Recently just started exploring CFDs, Contract for Differences, a derivative product where one can "short or long" the market without involving trading with the mother share but playing with the price flucuations.

If one participate in CFDs, one doesn't participate directly in the market by buying and selling the mother share itself. One is actually betting with the broker, the broker will earn the commission fees, while borrowing shares from its inventory to hedge its position.

One can long or short CFDs and the price is the same as the mother share.

Assuming if it's a bear market,if one have the patience and cash, you want to have a long position, you "feel" the price is cheap, you buy...but how long will the share appreciate or see day light, break resistance? 2nd thing is that your cash will be locked in the share. Are you planning to be a long term investor by choice or by circumstances?

One can short using CFDs, in this bear market, to earn a relatively safe returns as the stock is going down trend and of cos, there will be probability that it will go uptrend then you will have to learn to cut losses and cover your position.

When choosing brokeage to trade CFDs, do know that different brokages some offer a longer list of shortable shares, some counters lack liquidity, thus will need for a higher initial margin.

Remember, CFDs are leverage products and there will be margin calls if there are increase unexpectated volatility.

For now, i will continue to explore and share if i have future experiences.