Can CFD Positions Be Held in the Long-Term?

Contracts for Differences (CFDs) have become immensely popular over the years, especially with the rise of retail trading. At the same time, there is a common misconception that CFDs are short-term leveraged financial tools.

While CFDs are mainly used for day or swing trades, investors can consider CFDs trading for long-term purposes.

CFD Position Trading

CFD position trading lets traders speculate on the future movements of an underlying instrument without owning or taking physical delivery of the security.

CFDs can be utilized for a broad array of underlying instruments, including stocks, commodities, foreign exchange, and cryptocurrencies. These traders can be executed and held for months or even years, as position trading concentrates on long-term trends and the overall movement of the investment. This can, however, be difficult for investors who monitor minor or short-term price action movements.

CFD Expiry Dates

Because CFDs are often traded on a margin, they do not maintain an expiry date like other financial tools. That said, an overnight financing rate is charged at the base rate of your investment, plus 2.5% on long positions (if you sell a position overnight, the broker pays you an overnight fee).

Benefits of Long-Term CFD Trading

Overall, CFD trading offers investors a wide range of advantages, including long-term traders. For example, for investors who plan to hold on to their investment for several years, trading CFDs can give lower costs and simplicity of each transaction.

Clarifying the Misconception

There has been a common misconception in the financial community (including among many who might have gotten involved in traders during the pandemic-era boom) that CFDs are day or swing tactics. But CFDs could be a potential option for long-term trades, especially considering that the stock market generally goes up over time.

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