As a beginner in the stock market, you may not be aware of the options to invest in with little money. Most beginners do not even know that it is possible to trade in stock without having a large bank account.
The days of having to have a high minimum investment through stock brokers are gone, and even those with as little as $100 can speculate on the markets. Besides the high minimum investment limits, the brokers also charge commissions that can be unfavorable for the small investor. But now thanks to technology, it is now possible to engage in the stock market without having to have millions in the bank.
So what is the answer to investing in stock without much money?
With CFD (contract for difference) instruments, you can see a mirrored image of stock movement and make a profit when the underlying assets move based on the position you have taken. In this case, you do not own the underlying assets but is a contract between you and the broker. These instruments have become so popular over the years given the many advantages they possess.
The traditional broker requires a 50% margin meaning you as the trader will need a high cash outlay. However, with a CFD broker, a 5% margin is all that is required resulting in a very small cash outlay. When you enter the CFD trade, the stock position shows a loss equal to the spread size you have taken meaning the stock has to appreciate by the margin, for example, a 5 cents gain to be at breakeven point hence the tradeoff. When compared to the traditional broker trading, CFD puts more money in the pockets of the trader.
The Advantages of CFD
1 Higher leverage
It provides much greater leverage than traditional trading; leveraging begins from as low as 2% margin requirement in the CFD. Depending on the underlying assets, the margin can go as high as 20%. With the low margin, you are required to outlay less capital and get greater returns.
2 Access to global platform
Most of the CFDs offer products from all the world markets so you can easily trade in whatever market you want from a single platform. There has never been a convenient way to trade with so little money.
3 there is borrowing stock or shorting rules
CFD markets have no short selling rules like in certain markets where shorting is prohibited at some time. Since there is no ownership with CFD trading, the trader can short without any borrowing or shorting cost.
4 professional services at no fee
A CFD broker will provide all the types of trading juts like the traditional broker. When a traditional broker offers the services like guaranteed stops, contingent orders, and limits, they charge a fee; however, CFD brokers will do all these for free when you enter or exit trades. The broker makes his money by making the stock trader pay the spread depending on market volatility, but generally, it is usually a fixed spread.
5 Freedom in day trading
Some markets require you to place a minimum capital to day trade or place limits in the amounts possible within given accounts. There are no restrictions with CFD markets; you can day trade at will. With as little as $1,000 you can open an account and begin trading.
6 Trading options
With CFD markets, you have so many options to trade on; there are treasury, stock, currency, index, commodity and sector CFDs. So other than stock traders, nay beginner can trade in the various financial vehicles juts like the expert trader with little money to start and lower cost of trade.
Many people still hold the belief that stock trading is for those with a lot of money and expertise in analyzing the market. This is no longer true. Today, anybody can learn how to invest in stocks for beginners with little money and make it. There are many online brokerage accounts today, and once you open one, the rest is easier than you ever imagined. Many of the online brokerages have a low minimum opening balance of $500 or less while some require nothing at all.
You do not need to have a flowing bank account to start investing; some may even have the money but spend it foolishly resulting in the inability to invest. Even if you are working to pay off debt, there is always a way for you to invest with CFD trading. All you need to know are the available options and the benefits of this trading platform especially if you are new to stock trading. The time to start improve your finances is now with the little money in your hands.
In summary, CFD trading offers lower margin requirements, no rules on day trading or shorting, little to no fees and easy access to global markets from a single platform. You have the advantage of getting many alternatives to stock including currencies, treasury, and index. It is a great choice for those traders looking for short-term and long-term trades though every trader should weigh the costs and benefits of the choices before proceeding. You should also be aware that the leveraging option can also lead to increased losses if the stock doesn’t move the way you want.
The common excuse of not having enough money should no longer keep you from investing. Eve with little money, you can now trade in CFD markets and grow your portfolio the smart way. And the greatest thing about this is that you can use automation. No more excuses of forgetting to fund your account, those starting stock trading can now use electronic transfer between the trading account and bank account where you manually transfer funds or set a regular automated transfer at chosen intervals. And to avoid high transfer fees, invest only a little amount every month or in a quarterly interval.
It seems like a small insignificant amount when you invest $50 every month, however, when you do this for five years, the compounding will astound you. You will not believe your meager $50 can turn into millions especially with well-calculated trades over a long time and a good trading strategy. Now is the time to start trading your little money without fear since you lack experience in stock trading.