Table of Contents
As a Singapore trader, you may wonder whether to trade stocks or CFDs. CFD trading in Singapore is becoming increasingly popular, and for good reason. CFDs offer several advantages over traditional stock trading, making them an attractive option for investors. For those wanting to try it out, you can get trading with a Saxo CFD broker.
CFDs offer leverage
A significant advantage of CFD trading is that it offers leverage, allowing you to trade with more than you have. It can be helpful because it allows you to make more trade profits. However, you can also lose more money if the trade goes against you. In contrast, stock trading in Singapore doesn’t offer leverage. You can only trade with the money in your account, limiting your potential profits.
CFDs are traded on a margin
Another advantage of CFD trading is that it is traded on margin, which is the amount of money required to open a position. When trading on margin, you only need to put down a small percentage of the total value of the trade. The broker provides the remainder. It allows you to trade with more money than you have in your account and can increase your potential profits. However, you can also lose more money if the trade goes against you. Stock trading in Singapore is not traded on margin, so you need to have the total amount of the trade in your account to open a position.
CFDs have low transaction costs
CFD trading usually has low transaction costs. You only need to pay the spread, the difference between the buy and sell price. Some brokers also charge a commission, often built into the spread. Stock trading in Singapore can have higher transaction costs because you need to pay both a commission and stamp duty. The commission is a fee charged by the broker for executing the trade, and stamp duty is a government-levied tax on all stock trades.
CFDs are flexible
CFDs are very flexible because you can trade them long or short. When going long on a CFD, you are hoping the price will rise so that you can sell it at an increased price and make a profit. When you go short on a CFD, you are betting that the price will decrease so that you can repurchase it at a decreased price to make a profit. This flexibility is not available with stock trading in Singapore because you can only trade stocks long. You cannot short sell stocks in Singapore unless you have special permission from the Singapore Exchange.
CFDs offer 24-hour trading
CFDs offer 24-hour trading, so you can trade whenever you want. The markets are open from Sunday night to Friday night (GMT). It gives you more time to plan your trades and take advantage of market opportunities. In contrast, the stock market in Singapore is only open from 9:00 am to 5:00 pm on weekdays.
CFDs offer access to a wide range of markets
When you trade CFDs, you can access a wide range of markets, including forex, indices, commodities, and shares, which gives you more opportunities to find trades that suit your investment goals. Stock trading in Singapore is more limited because you can only trade stocks that are listed on the Singapore Exchange.
CFDs provide trader protection
When you trade CFDs with a regulated broker, your trades are protected by specific regulations. For example, brokers must maintain segregated client accounts to separate their money from their funds. It protects your money if the broker goes bankrupt. Stock trading in Singapore does not have the same level of trader protection because it is not regulated similarly.
You can use CFDs to hedge your stock portfolio
You can use CFDs to hedge your stock portfolio against market risks. For instance, if you’re worried about a market crash, you could sell shares short using CFDs. It would offset any losses in your stock portfolio. You can also use CFDs to take advantage of market opportunities. For example, if you think the market will rise, you could buy shares using CFDs.