General Forex

Basics Of CFDs And Its Trading

CFDs are contract for differences that are used for trading these days.

Online trading has become a lucrative option because of the ease of the process and lesser time needed to complete transactions. In the past, people had to trade manually and visit the trading company from time to time. These days, almost all the transactions are happening from mobile devices or computers. The internet revolution has changed the world of trading. You can buy and sell financial instruments like CFDs in just a matter of minutes.

Online Trading Basics

When you are doing online trading, you need to be aware of a few best practices. Using these best practices will ensure that all your transactions are proper. For CFD trading, you don’t need to be a financial geek. Just basic knowledge of contracts for difference will give you the confidence to do online trading. Reading a few articles on online trading, will give you more in-depth knowledge of the entire process.

You will need a good trading website which will give you all the resources and help needed for understanding the basics of online trading. If you are new to CFD training, you can join an online seminar that is designed by financial experts. You will find thousands of seminars on the internet, but not all of them will provide relevant basic details about contract for differences.

Cfd Trading Basics

Generally, it is seen that the online seminars cover the basic definition of CFD, the trading platform, and charting and trading strategies. You can also visit few local seminars, which will give you a brief insight on topics such as risk management, profit making in a falling market, efficient online trading and the like. If you are a registered member of a good online trading website, you can get good training programmes via e-mail. Online trading websites generally send across a tutorial that gives you a bigger picture of online trading.

The benefits of online trading are immense, but you need to work smartly. If you are not internet savvy, it is recommended that you take a crash course in internet and browsing skills. The ability to use the Internet optimally will give you a cutting edge over competitors. If you have taken the first step towards online trading, don’t look back. There are ups and downs in online trading, but with a little smart thinking, you can surely succeed in this challenging domain.

If you have taken a trading decision, you may need a second opinion on that decision. You can consult financial advisors who are well equipped with knowledge of the market conditions. Before you start trading in CFDs, you will have to understand how they work and the risks involved in selling and buying them. Most online trading websites have a product disclosure statement that tells you more about the financial instrument and the risks involved in dealing with those financial instruments.

After getting all the necessary information you need to know about online trading, the next step is to open an online trading account. To open an account, you will have to check out the procedure by visiting the website of any reputed online trading company.

General Investing

TFSA vs. RRSP

The Federal Government introduced the tax free savings account in their last budget. Basically any Canadian citizen over the age of 18 can open an account and is allowed to deposit $5,000 per year. Any unused portion of the $5,000 in a given year can be carried forward. The account has no impact on RRSP yearly contribution eligibility. All income earned by the funds in the account are tax free and can be taken from the account at any time.

RRSPs have been the most widely used form of saving for retirement. People like you and I blindly scramble towards the end of February each year to purchase RRSPs from our bank or financial planner so that we can get a small tax break. The majority of people investing this way do not have any idea what their RRSPs are actually being invested in. In many cases when the funds actually do show a return, that return sits idly in the RRSP account and is not put back to work earning more dollars for the investor. Many people are in for a shock when they retire as taxes can reduce the face value of the RRSP account by as much as 39%. Imagine planning to have a million dollars to carry you through your retirement years only to find out that after taxes you actually have $610,000. The other consideration that one must look at is the fact that the RRSPs are usually purchased with after tax dollars and those same dollars are taxed again when the account is liquidated.

Bankers are programmed to sell RRSPs and are generally quite good at it. They however, have failed miserably in selling the tax free savings account product. The returns offered on tax free savings accounts by the banks are nominal at best and in many cases just cover the bank fees on the account. A number of investment companies offer products with higher yields and should be considered as a legitimate alternative.

The best way to compare RRSPs to the tax free savings account is by way of an example:

The client has decided to invest $5,000 per year for the next 5 years at which point the investment will be cashed in. The rate of return for both products is 7.0%. The example assumes that the client will reinvest yearly earnings. The tax rate used is 39%.

RRSP TFSA
Year 1 $5,350 $5,350
Year 2 $11,075 $11,075
Year 3 $17,200 $17,200
Year 4 $23,754 $23,754
Year 5 $30,767 $30,767

Taxes on the RRSP balance will be $11,999 leaving the client with $18,760 for his 5 year investment of $25,000. As there is no tax on the tax free savings account the ivnestor will have $30,767 from his $25,000 investment. One might argue that the tax deduction created by purchasing an RRSP should be part of this equation. However, then one would have to calculate the initial income tax paid to earn the investment funds. These numbers basically cancel each other out.

The bottom line is that the federal government has provided Canadians with a way to accumulate tax free dollars. In order to take full advantage of this product the general public will have to consider alternative investments offered by private investment companies.

General Investing

Tips For Investing in Silver

Investing in silver is popular way chosen by many people to hedge against inflation and build up a strong portfolio. However, there are several things to know about investing in silver. Though it is a precious metal like gold, the market characteristics are very different. It is best to do your homework thoroughly before entering the market.

Different forms of silver investments

Silver bullion is the most traditional way of investing. If you want to physically own the silver, you can opt to buy silver bars or coins. The bars are flat rectangular pieces of the metal which come in different sizes ranging from 1 troy oz bars to 1000 troy oz bars. You can store these bars in the safe of your home or at the banks. These are far easier to buy than gold bars.

Another type of silver investment is coins. You can purchase the Canadian Maple Leaf or the American Eagle coins as a part of your investments. But it is better not to aim at old and rare collector’s coins because you will find it difficult to both buy and sell. The value of a coin is determined by the value of the intrinsic amount of silver in it.

It is much more convenient to buy silver exchange traded fund or ETF. The largest silver ETF is the iShare silver trust.

Silver Certificates show how much silver you own on a paper. They are easy to store, buy and sell.

Swiss banks allow you to have silver accounts. You can buy and sell silver on these accounts rather like foreign exchange.

ETF and Silver bullion are the best options for silver investments, but you should know that in the USA, if you own a silver item for over a year, it is considered to be collectible. So, any gains that you make from selling it will be taxed at a far higher rate. So, bullion may not be suitable for the long-term investment if you are looking to invest in silver over a long period of time then silver ETF would be the better option.

Facts about investing in silver

Silver prices are much lower. So, they are far more accessible to the ordinary investors than gold.

The amount of silver bullion actually traded in the market is far less than gold. This increases the risks of investing in silver.

The price of silver is far more volatile than gold and it changes quite drastically in response to demand and supply. So, the silver market is less stable than gold.

In many countries, gold enjoys a special tax status but silver does not. For example, in the European Union, trading in gold bullion is exempt from VAT but not silver.

Though the price of silver generally follows that of gold, it is regarded as a less effective protection against inflation than gold.

Silver investments may be quite suitable for people with limited funds who are looking for an assured profit, provided you follow the standard safeguards in buying and selling.

General Business

CFD Trading – Top Advantages That Lure Investors

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In CFD trading, there are two parties and there is a contract. One of the parties is the buyer and the other is the seller. In this type of trading, the seller is obliged to the buyer to pay the difference between the price of a particular asset at the opening of the contract and its current price.

However, if the difference is in the negative, the tables get turned and it is now the buyer who is obliged to the seller to pay the difference.

CFD trading started in London in the 1990s. But, it was only after a decade that investors learned that this trading actually brought benefits similar to financial spread betting!

Contracts For Difference is illegal in the United States of America. This is because of the inhibitions put by the US Securities and Exchange Commission on financial tools available over-the-counter. However, this trading is permitted in the UK, Netherlands, Germany, Poland, Portugal, Switzerland, Canada, South Africa, New Zealand, Australia, Ireland, France, Spain, Sweden, Japan, and Singapore. Some reports indicate that CFD trading would begin in Hong Kong too.

Advantages

One of the biggest advantages of trading in CFD is that it poses no particular terms and conditions. The traders can set their own terms and conditions and the investors may be required to comply with them.

Moreover, the traders can fix their own payouts in the pretext of account management charges, commissions, fees, and others.

Another big advantage is that contracts in this trading hardly expire. If there are open contracts during the closing of the day, they can be

extended to the next trading day. If, as a trader, you wish to make profits in CFD trading, you need to keep the minimum margin. If you are an investor and wish to earn money through this trade, you must be able to conduct a thorough market research to know the trends. You must also be able to calculate risks. Both of these are to be done on a regular basis for a lucrative existence in this trade. These efforts help you to reduce risks that might make you lose money and help you detect any loss already incurred. You get a chance to cancel the loss order in time.

Types of Trading

The market of today offers a slew of trading forms for investors who are ready to risk their money in a bid to make more. There are traditional betting, futures trading, financial spread betting, other betting types, and more to exploit. Then there is CFD trading. You choose the type of trading depending on your knowledge about the particular trade, the amount of money you can put at stake, and how much you are willing to hit and miss during the trade.

Of all the trading forms, trading in CFDs provides a similar experience to that obtained in futures. Its leverage benefit and liquidity makes this trade so attractive that many investors become loyalists of this type of trading! So, if you wish to bring some excitement with those crispy dollar notes, try CFD trading.

General Business

CFD Trading In Today’s Market

CFD trading gives you the flexibility that you require to trade in current markets. The important word here is flexibility. That is what gives an investor control. In fact, control, by definition means having a plan ready for every scenario that may turn up your way. By using a mix of leverage and lower transaction costs, CFDs allow you to maximise your returns. Features like no minimum contract size and no expiry date ensure that no unnecessary entry or exit barriers are created. It as free as a market can get. It is these features that make CFD trading so lucrative. Let’s delve into the details to find out more.

Characteristic Features of Cfd Trading

Leverage: In business as in physics, leverage is the ability to do more and more with less and less. Great personalities have claimed that they could dislodge the earth, if they found a lever big enough to do so.

While trading contracts for difference, one needs to understand it as the amplifiers of profit and/or loss.

CFD Trading allows you to take the best advantage of a market movement by using leverage. You only have to put 5 percent of the money down on most trades. The balance 95 percent will be financed by the trading company at LIBOR+/- a few basic points. Hence, it is possible to gain 50 percent or more in a single day when the market may have moved less than 3 percent!

No Contract Size: CFD trading is pretty much like trading financial derivatives such as the futures market. The vital difference is the fact that there is no minimum size of a contract. You could trade a CFD for one single stock if required. This gives you considerable flexibility as your investment need not be in multiples of lot sizes.

Example: For a futures contract, you may have to trade a lot size of 100 shares. Hence, the options for you are in multiples of 100. Increasing by

Multiples of 100 increase your margin requirements and risk considerably. CFD trading, on the other hand, will allow you to trade one share if required. You, therefore, are in complete control of your investment decisions.

No Expiry Date: Another vital difference between the CFD trading and futures market is that there is no expiry date. In a futures contract, when the expiry date is near, the number of buyers for a contract reduces significantly. Liquidity crunch exerts a downward pressure as the contract comes near its expiry dates. Contracts for difference are free of any such artificial price declines.

Lower Transaction Costs: CFD trading may cost you more in terms of brokerage in some parts of the world. However, the whole idea was invented to take advantage of favourable taxation treatment towards gain from stock markets. CFD trading has the potential to decrease your tax bill and increase what you take home.