What are Listed Contract for Difference Trading (CFD Trading)

You have probably gotten into the point where you have read most CFD trading articles online given that you research things before getting yourself into it. However, most online descriptions have somewhat described CFDs in a very general term and not a lot have discussed what Listed CFDs are online. Do not worry as we have listed below what you need to know about listed CFDs .

What are Listed CFDs?

Basically a Listed Contract of Difference or Listed CFD is a contract between a seller or a buyer where they exchange for the difference between the opening and closing price of an underlying asset. As the name describes, it is a listed CFD for the London Stock Exchange so this would mean that the pricing for CFD Trading is transparent for investors who would want to get into trading during the regular market hours. As a trader, you are able to open positions through commodities, indices and shares for a small margin requirement.

How does Listed CFDs work?

Buying an existing and profitable position in Listen CFDs has an entry level where the contract has been made. The contract shall have the amount of which the buyer or trader pays initially shall be based on the share price that was current during the agreement. If the trader looks at the market “bullish” which means he or she is looking into a long position with an entry level which is below the current price. If the trader or investor expects the value to fall, that is what is called a “bear”market, which is they are able to buy back at a low price in the future and they can open a “short” position at the entry level.

Advantages of Listed CFDs

One of the reasons why most traders get into Listed CFD is that they get full exposure to the movements of the assets at a very small initial cost or margin requirement. This can go from 15% to as low as 5% of the investment in the assets. Another great advantage for traders is that Listed CFDs are able to offer strict and limited liability. A trader cannot lose more than their initial margin investment even if the market has gone really far in terms of movement.

A stop-loss limit that is made in all Listed CFD will mean that your losses can only happen at a certain point after which the position shall be closed together with any residual values in the agreement shall be paid back to the holder. When compared to the standard CFD trading, which can possibly result in bigger losses that can exceed your initial margin investment if the market moves in the opposite direction of what is projected by the trader.

Another instance where people chose to trade with Listed CFDs is the charges being in one single price instead of a daily and weekly fee  that’s being charged to you which is the usual set up for standard CFD. What does this mean for the trader? Simply put, as a trader, you are able to calculate the true cost of your trades easily.

Finally, most traders get into a listed CFD because they are able to engage in this activity thanks to the low margin requirement. Usually at 2%, this enables others to surpass limiting situations that they have encountered in trading stocks and can engage in different leveraged exposures and diversification