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CFD - the contract on a difference of the prices. The stock.

  • What is CFD?

    CFD ( the contract on a difference of the prices ) is a share market on which the agreement that participants of the market buy was accepted and sell stocks which physically never belonged, and will not belong to them. Differently, they play on a difference between purchase and sale of virtual stocks, earning thus the present money. Many people try to get stocks of this or that enterprise now. The given procedure lasts long enough that it is necessary to buy all over again, and then also to renew stocks from one owner on another. Depending on where you buy the stocks, the given procedure borrows from 3 days and more. For the traders, earning not from possession the goods, and from a difference in costs of its purchase and the sale, the given process is the extremely inconvenient. For the period in some days the price of stocks can essentially change. Therefore so-called market CFD has been created. Strangely enough, but native land CFD is not the USA, and the Great Britain. Tool CFD which has then extended worldwide there has arisen. Probably, it has occured that in the USA there are the laws forbidding granting of greater margins of credits for trade in the share market. One of advantages CFD, however, as well as FOREX is that the insignificant seed capital is necessary for an input on the market for the trader. It became possibleowing to features margin trade. But, unlike work on FOREX trade on CFD is adhered to exchange sessions and is guided by quotations which are exposed on really really changing owners of the stock.

  • The share market represents a part of the financial market, where operations with securities and financial tools derivative of them ( futures, options, contracts for a difference - CFD, etc. ) are spent. The securities ( according to the Civil code ) is the document certifying with observance of the established form and obligatory requisites property rights, realization or which transfer are possible only at its presentation. One of kinds of securities is the ordinary stock � the share issue securities fixing the rights of their owners ( shareholders ) on reception of a part of profit of joint - stock companies in the form of dividends, on participation in management of joint - stock companies and on a part of the property remaining after their liquidation. Accordingly the share market is a part of the share market. It allows corporations to involve additional means due to sale of stocks to the interested investors, and those, in turn, to earn on fluctuation of share prices and participation in profits of the companies emitters of stocks. In due course on the basis of securities there were derivative financial tools, such as futures, options and contracts for a difference. Their pricing is indissolubly connected with change of the price of a basic active ( the ordinary stock or other securities ). Each of tools has the features and is better approaches for this or that strategy of work and definite purposes. So, the investors possessing solid means and planning long-term strategic investments will accept work directly with stocks is better. Use of futures and options will save you from serious losses. Contracts on a difference ( Contract For Difference - CFD ) a stock have appeared rather recently - about 20 years ago, in the Great Britain. Their advantage consists first of all in absence of necessity of attraction of significant means due to use of a credit shoulder, more simple and cheap mechanism of the conclusion of transactions and executions of obligations ( there is no physical delivery of stocks ). Thus they completely reflect change of stock quotes that does by their ideal tool for carrying out of urgent and intermediate term speculative operations.

  • The free market, in particular and financial, represents very complex and in many respects the self adjusted mechanism. If to analyze separate parts of this mechanism all looks logically and clearly enough. But as soon as all factors enter interaction - to predict precisely consequences begins difficultly if not it is impossible. The financial market is influenced not only a supply and demand, but also many other things with factors - the interest rate, the international exchange rate of currencies, political events and even weather! All it is in aggregate reflected in the prices for stocks and bonds which are the basic goods of the financial market. You, certainly, repeatedly saw on the TV a strip of running symbols with any strange designations. This line - a ticker refers to, and it shows constantly varying prices for stocks of the various companies. On the screen of my computer on work I can receive much more exact and full information on the price for any securities. Happens, while you talk to the client about any stock, the price for it varies directly on eyes! What from itself the stock represents?

  • The stock is your share of possession of the company, and the size of a share is defined by quantity of stocks. We shall admit you have got 500 stocks of company Dell inc, you receive officially certified certificate in which it will be specified, that you have got 500 stocks of company Dell inc. In essence, you became one of owners of the company. As Dell inc it is presented in the market by millions stocks, your share will be very small, but you have the same rights, as holders of large share holdings. As the owner of the company, you have the right to dividends ( i.e. profit ) and a vote at a choice of board of directors. If business at the company go well, profit high you will reap fruits of success in the form of dividends and a rise in prices on stocks. However, at a bad state of affairs dividends can be reduced, and even not be paid at all moreover and the price of stocks can go downwards. It seems, that can be easier - buy stocks of the large, prospering enterprises and all will be excellent! And though the idea absolutely correct to realize it happens uneasy. Other version of securities - bonds. The bond is a promissory note on which the borrowing party promises to return the sum taken on loan to the certain term and, besides, to pay annual percent. For example, you buy bonds of company "X" for the sum 5.000 USD. Term of repayment of the bond in 2007. The interest rate ( coupon ) of 6 %. It means, that having bought such bond for 5.000 USD, you will receive for it 300 USD annually and in 2007 receive back 5.000 USD. Buying bonds, you become not the owner of the company, and its creditor.

  • Last 20 years huge popularity have received mutual funds. Buying stocks of such funds you have two basic advantages: Distribution of the capital on a plenty of stocks and ( or ) bonds. Professional service. Mutual funds are the financial companies buying huge portfolios of securities. In such "portfolios" stocks and bonds of tens and hundreds companies contain, under which funds let out own stocks. Each stock of fund represents a proportional share of stocks of "portfolio" and as the capital is distributed on the big number of securities, the risk of financial losses decreases. In the chapter of mutual funds commands of managers which watch a condition of fund cost and spend sale and purchase of securities with the purpose of increase in profit. Unit investment trust in many respectsit is similar to mutual fund with that difference, that the chosen portfolio of securities remains constant, and expenses on payment of compensation to managers thus are cut down. You can buy a share ( unit ) such trust and if the choice of securities of a trust is good it works not worse mutual fund. Precious metals too can be a part of investment. It is possible to buy gold, silver, platinum in ingots and coins. The monetary system of the West today is not adhered to quotations of the prices on gold. However many conservative investors continue to trust, that gold - most reliable of ways of investment. Now, for example, the prices for gold very low, but it is necessary to inflation to prove, as the prices forit rise. Futures and options it is contracts on the purchase and sale of the certain quantity of stocks, bonds, gold, food stuffs, currencies, etc. It is very specific and refined method of investment and, basically, is destiny of professionals. Having the account in broker firm, you can buy and sell all set forth above ( and many other things ) values. The problem only in buying more cheaply, and to sell more dearly. And that it to do, it is necessary to know not only what to buy, but also when! The Improbable abundance of opportunities in investment does this process similar to a science, art and game simultaneously. Besides it is a fine way to join new knowledge.

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