CFD Trading Offers Very Linear Hedging

CFD trading offers the most affordable, most versatile, and at the same time accurate, dollar for dollar way to trade or hedge market movements in a linear way.

Why Other Instruments Failed to Win over CFD Trading

For years, many traders had been using Futures contracts as a way to hedge against adverse movements in the price of stocks, commodities and currencies. But futures have a big disadvantage in that their pricing is not precise. In fact the Futures market itself is predicting (based on statistical assumptions), how a Futures contract should be priced, relative to its delivery date. And while Futures offer great affordability through leverage, their lack of pricing precision is too costly, and makes it impossible to hedge a stock, say for a week. The stock in question may go down by several dollars in price, and yet the Futures market, which looks several months ahead in the future, may price the Futures on that stock at only few dollars lower. So that the stock for example has dropped from $100 down to $70, but the hedger having gone short on the Futures contract may well find that that Futures contract has only moved lower by $20, leaving them partially unprotected, and at a loss by $10 per stock! So because Futures are long term instruments, lack the linearity necessary to hedge shorter term trades. And when stocks go down, most of the risk is concentrated over few days at a time. This is just one example where CFDs come to the rescue, by providing ultra precise, linear (dollar for dollar) protection, at the same leverage and affordability that Futures would have offered! In forex too, all trades, through any forex broker can be linearly hedged through a CFD contract.

CFDs Win Hands Down over Futures!

CFD contracts in the hands of a reasonably good trader, results in much more profitable trades, as well as much much better protection against unforeseen risks. All CFD trading platforms today, more or less offer unique advantages, that no other broker (Futures or Options broker) can provide. Especially when dealing with hedging trades for small, or too fast price movements. CFDs have you fully covered long before Futures or Options even begin to settle down. I cannot stress enough what
is CFD trading capable of, it is simply the most linear way to trade fast market movements. Volatility risks are removed, for the most part, and all the trader has to focus on is their market there and then. They don’t have to worry what will happen in 3 months time from now, or if volatility goes against the market. The poor Futures trader is at disadvantage, because they are using a 3 month contract, and linearity is very poor. Even weekly Futures contracts have poor linearity and provide very crude protection in hedging trades.