How to Use CFDs to Diversify Your Investment Portfolio in Singapore

CFD Trading in Singapore offers investors the ability to diversify the portfolio through exposure to a large number of markets without actually owning the underlying assets. CFDs enable speculating into price movements in equities, commodities, indexes, and even cryptocurrencies while keeping control over the risks inherent in investments when using traditional assets.

One of the benefits of CFD Trading in Singapore is that one platform can access markets worldwide. In traditional investing, you would have to buy shares of companies or sectors, but with CFDs, you can tap into global markets in Asia, Europe, and the Americas. For example, where one may only have had speculation over local Singaporean stocks through CFDs, one can now speculate over international indices, commodities like gold and oil, or currency markets. Spreading risk over classes of assets really diversifies your exposure, especially within a highly volatile market.

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Secondly, CFD trading gives way to flexibility in the ways you may trade. One can trade with long and short positions in a CFD. This way, traders can make a profit in both an upward and a downward market. If you are sure the commodity or stock is going to come down in value you can open a short position, betting on the price decline. And when you think the market is going to be up, you can go long. Such an openness might increase your opportunities for earning from an offer to all the movements in the market – whether it is upward or downward.

Leverage – yet another benefit of CFDs. In Singapore, a broker will typically give you some leverage, meaning you can control a much larger position with an enormously smaller initial investment. Though the leverage can make your profits enormous, it also increases the risk since losses can exceed your initial deposit. To manage that risk, you ought to use tools meant for this kind of risk management as in stop-loss orders, among other measures that must go with determining the comfortable level of leverage that you are conversant with. It can be diversified across different assets, thus spreading the loss if one position does not perform well.

CFD trading also gives one much longer trading days than traditional stock markets. In fact, most markets are available during only certain hours of the day. The CFD markets, on the other hand, are normally open 24/5. Therefore, traders in Singapore can immediately respond to news and economic reports from around the world. For example, oil prices may have changed overnight because of news from some country over which they are about to go to war. You can fine-tune your positions before it actually is trading time the next day.

Finally, CFDs can also be used for hedging. If you are hugely exposed to certain asset classes, like Singaporean real estate or domestic stocks, the CFD positions you in non-correlated markets like gold, hence hedging you. So you would expect to see your stocks fall, you could hedge yourself in commodities that usually go up on economic downturns.

Although some great diversification opportunities are presented through CFD trading, care should be taken before one decides to pursue it. Market research and risk management are crucial activities that need to be undertaken before taking the plunge since the risks associated are rather heavy. The Monetary Authority of Singapore, MAS, regulates the fair play and transparent market in Singapore for CFD trading. Investors should, however, consult professional advice for safe and effective navigation of markets.