Eight reasons why you should consider trading CFDs in the UAE

Contracts for Difference (CFDs) are a great way to speculate on the movements of financial markets without actually purchasing the underlying asset. CFDs are available in the UAE and can be used to speculate on stocks, indices, forex and commodities. Here are eight reasons why CFDs should be used in the UAE.

For more information on CFDs as a product or ways to set up a trading account, you can visit Saxo UAE.

What are CFDs?

Contracts for Difference (CFDs) are derivative instrument that allows traders to speculate on the price movements of underlying assets without actually owning the asset. CFDs are available on various financial markets, including stocks, indices, forex, commodities, etc.

CFDs are traded on margin, meaning that traders only need to deposit a small percentage of the total value of the trade to open a position. It allows traders to leverage their money and potentially make more significant profits than would be possible if they were trading with their capital. However, it also means that losses can be magnified, and traders should always use stop-losses to limit their downside risk.

Reasons you should consider trading CFDs

Let’s examine the eight reasons CFDs should be used in the UAE.

1. Access to a wide range of markets

CFDs give traders access to a wide range of global financial markets. It includes popular markets such as stocks, indices, forex, commodities, etc.

2.CFDs are traded on margin

As CFDs are traded on margin, traders only need to deposit a small percentage of the total value of the trade to open a position. It allows traders to leverage their capital and make more significant profits than possible if they were trading with their capital.

3.No stamp duty

When trading CFDs, there is no stamp duty payable, making them an attractive proposition for traders in the UAE.

4. Ability to go short

CFDs give traders the ability to go short and long on an asset, meaning that they can profit from rising and falling markets.

5. Reduced transaction costs

CFDs typically have lower transaction costs than other forms of trading, such as share dealing. It is because CFDs are traded over the counter (OTC), and there are no exchange fees or stamp duty.

6. Access to global markets

As CFDs are traded OTC, traders have access to global markets 24 hours a day, from Sunday evening through to Friday night.

7. No need for a brokerage account

There’s no need to open a brokerage account when trading CFDs, as they can be traded through online CFD platforms.

8. Tax advantages

CFDs offer tax advantages in the UAE as they are treated as financial instruments for tax purposes. Any gains from trading CFDs will be taxed at a lower rate of 0% (for individuals).

So, these are eight reasons why CFDs should be used in the UAE. If you’re considering trading CFDs, make sure you understand the risks involved and use stop-losses to limit your downside risk.

Risks of trading CFDs

Despite the benefits of trading CFDs, it is a product that comes with risks that all traders should be aware of.

The main risk when trading CFDs is that they are traded on margin. It means that if the underlying asset’s price moves against your position, you could lose more money than you have deposited in your account. It is, therefore, essential to use stop-losses when trading CFDs to limit your downside risk.

Another risk to be aware of is that some CFD providers offer leveraged products, which can magnify profits and losses. It is, therefore, essential to understanding how leverage works before using leveraged products.

Finally, as with any form of trading, there is always the risk that the markets may move against you, and you may make a loss. It would help if you only traded with money you can afford to lose and always use stop-losses to protect your downside risk.

In conclusion

CFDs offer several advantages for traders in the UAE, including access to a wide range of markets, lower transaction costs and the ability to go short and long on an asset. However, it’s crucial to be aware of the risks involved in trading CFDs, including the potential for losses to exceed deposits and leverage to magnify both profits and losses.