Singapore is home to a thriving economy with a robust international trade and finance focus, making it an ideal location for financial institutions and investors. Traders in Singapore have access to a wide range of financial markets, including the forex, stock, and futures markets. One of Singapore’s most popular trading instruments is the CFD, or contract for difference. It’s a derivative instrument that allows traders to speculate on the price movements of underlying assets without actually owning those assets. You can begin to start trading by using a Saxo CFD broker.
CFDs are available on various underlying assets, including stocks, commodities, indices, and currencies. The ability to trade on leverage makes CFDs attractive for many traders. In this article, we will discuss seven reasons why CFDs may be an attractive option for traders in Singapore.
CFDs are traded on margin
One of the key features is that they are traded on margin. It means that traders only need to put up a small percentage of the total value of their trade as collateral. It allows traders to enter into larger trades than would be possible if they were required to pay the total value of the trade upfront. The ability to trade on margin can be a significant advantage for traders as it allows them to magnify their profits and losses.
CFDs offer leverage and low transaction costs
Another critical feature of CFDs is that they offer leverage. Leverage is a loan the broker provides to the trader, allowing the trader to control a more significant amount of capital than they would otherwise be able to trade with. Leverage can be an invaluable tool for traders, allowing them to increase their potential profits (or losses). However, it’s essential to remember that leverage increases the risk of loss, so experienced traders should only use it.
CFDs typically have lower transaction costs than other types of instruments, and this is because the broker charges no commissions or fees. Instead, the only costs associated with trading CFDs are the spread (the difference between the bid and ask prices) and the financing charges (if any).
CFDs are flexible
CFDs are flexible instruments for various strategies, including long-term investing, short-term trading, and hedging. This flexibility makes them an attractive option for many traders.
With this flexibility comes more significant risk, however. The ability to trade on leverage and use stop-loss orders can lead to losses exceeding the initial investment. CFDs are not suitable for everyone, and traders should only trade with money they can afford to lose.
CFDs offer access to a wide range of markets
CFDs give traders access to a wide range of markets. It includes the forex market, the stock market, and the futures market. CFD traders can take advantage of price movements in various markets. CFDs are easy to trade. It is because they are traded online, and all that is required is an internet connection. There is no need for traders to visit a physical location to trade CFDs.
CFDs provide anonymity
CFDs provide anonymity. When a trader purchases or sells a CFD, their identity remains confidential. It can be attractive for traders who wish to avoid disclosing their identity when trading. By remaining anonymous, traders can also avoid paying taxes on their profits.
CFDs are regulated
CFDs are regulated by the Monetary Authority of Singapore (MAS). It protects traders as MAS ensures that Saxo CFD brokers comply with specific regulations. These regulations include segregating client funds, providing negative balance protection, and offering fair and transparent pricing.
However, regulations can change, and traders must keep up-to-date with the latest changes. The MAS website is a good source of information for traders who want to stay informed about the latest developments.
CFDs are tax-free in Singapore
CFDs are tax-free in Singapore, meaning any profits from trading CFDs will not be subject to income tax or capital gains tax. It can be a significant advantage for traders, allowing them to keep more profits.
Tax laws can change, however, and traders need to check the latest regulations before trading. The Inland Revenue Authority of Singapore (IRAS) website is a good source of information for traders who want to stay up-to-date with the latest tax laws.
CFDs are a popular choice for many traders due to their flexibility, low transaction costs, and wide range of markets. They are also regulated by the MAS, which provides a level of protection for traders. Additionally, CFDs are tax-free in Singapore, which can be a significant advantage for traders.