Most people, regardless of whether they've done it or not, will have heard of trading stocks and shares. The process of investing in a company or asset by purchasing a smaller percentage of it, is well established. Today, traders on Wall Street have been joined by individuals making moves on the retail market via their computer. Across the industry as a whole, trading is now a $6.6-trillion-a-day industry. Of that, The Modern Trader report estimates that 9.6 million people now trade online.
However, as popular as stock trading is, it's not the only player in town. In fact, as more people wake up to the opportunities presented by online trading platforms, other options are presenting themselves. One of the leading, what some would call alternatives, is contracts for difference (CFD) trading. Although similar to investing in stocks, CFD trading actually offers more flexibility in certain regards. What's more, with technology constantly reshaping the market, the process of buying and selling CFDs is getting easier all the time.
The Internet Opens Up CFDs to the Masses
Perhaps the biggest reason for the rise in popularity of CFD trading is knowledge. As it so often does, the internet has opened the doors to novices through a combination of tutorials and data. Even a cursory look through an online CFD trading guide will provide you with the basics. As well as breaking down terms such as "going short" and "going long", the latest guides outline the fundamentals of CFD trading. In simple terms, traders agree to exchange the difference in the price of an asset between when it's bought and when it's sold. Thanks to this model, investors can speculate on the price of an asset increasing or decreasing over time.
When you're trading stocks, that's not possible. Because you have to purchase the underlying asset (something you don't do with CFDs), you'll only make money if the stock's value increases. With CFD trading, you can set up a "sell" order (aka go short) if you think the asset's price will drop. This flexibility is one of the main reasons more people are now turning to CFDs. However, it's not the only reason. Today, technology is doing more than helping companies explain the basics. For example, artificial intelligence (AI) is having a major impact on the potential success rates of traders.
Smart Reports Based on AI Learning
The area AI is having the biggest impact is data assimilation, analysis, and reporting. Analyzing data has always been a skilled trader need to master. However, as the market grows, there's more and more data to analyze. AI is not only able to sift through information faster than humans, it's able to review and segment it. In short, traders can get breakdowns of historical and real-time data using AI software. What's more, reports can provide graphs, pick out trends and offer future predictions. Because AI software is capable of self-learning, a program will continually analyze and reanalyze what it's been presented with. The end result is a finely tuned set of reports.
Naturally, there's no substitute for experience. However, with AI technology now finding its way into retail products, the learning curve for novices is increasing exponentially. When this is combined with a greater degree of flexibility, CFD is fast becoming a viable option for trading newbies. While few would argue that trading in this way still carries a certain amount of risk, it has advantages over trading stocks. Indeed, with the right fundamentals and a willingness to embrace modern technology, CFD has the potential to be every bit as profitable as investing in stocks.
