Which Assets Can Only Be Traded Via CFDs?

The underlying assets of CFDs can be stocks, indices, commodities, foreign exchange, etc. Some assets can only be traded through CFDs, because they are difficult or impossible to buy and sell directly in the spot market. These assets include the following categories:

Indices

Indices are weighted averages of a group of stocks or other financial instruments, used to reflect the overall performance of a market or industry. For example, the CSI 300 Index is a representative of the 300 largest listed companies in mainland China. Traders cannot buy and sell indices directly, because they are not physical assets, but abstract numbers. Therefore, traders can use CFDs to track the price movements of indices, and go long or short according to their predictions.

Stock Index Futures

Stock index futures are derivatives whose prices depend on the expected level of a stock index at a future date. For example, the CSI 300 stock index futures traded on the China Financial Futures Exchange are futures contracts based on the CSI 300 index. Traders can use stock index futures to hedge or speculate on the trend of the stock market, but stock index futures usually require higher margins and costs, and are subject to regulatory requirements such as position limits and large trader reporting. Therefore, traders can also use CFDs to simulate stock index futures trading, enjoying lower margins and fees, as well as more flexible trading hours and sizes.

Forex

Forex is a kind of currency exchange, such as US dollar to Chinese yuan. The forex market is the largest and most active financial market in the world, with a daily turnover of over 50 trillion US dollars. However, the forex market is also a very decentralized and unregulated market, mainly composed of banks, brokers and other financial intermediaries. This means that the forex market may have problems such as price manipulation, information asymmetry, liquidity shortage, etc. Therefore, traders can trade forex through CFDs, enjoy more transparent and fair prices, as well as more trading tools and strategies.

Commodities

Commodities are basic materials or products, such as oil, gold, wheat, etc. The commodity market is an ancient and important market, which reflects the changes of supply and demand, inflation, geopolitics and other factors. However, the commodity market also has some challenges and obstacles, such as storage, transportation, quality, seasonality and other issues. Therefore, traders can trade commodities through CFDs, avoid the hassle of physical delivery, and use leverage to amplify profits.

Conclusion 

In short, CFD is a financial instrument that can trade various assets, and it allows traders to speculate or hedge on assets that are difficult or impossible to buy or sell directly. However, CFD also has certain risks and limitations, and traders should pay attention to fund management and risk control when using CFD.