If an investor is living in Dubai and wants to earn profits via trading, the world is their oyster. Dubai offers plenty of avenues for investors to curate portfolios with assets that add value to their life. However, CFDs allow investors to do so without owning an asset at all. Continue reading to learn more about CFDs and how investing in the instrument can be beneficial for Dubai-based traders.
What are CFDs?
CFDs, or Contracts for Difference, are a type of financial derivative that allow investors to speculate on the price of an asset without owning it. An investor can trade in CFDs by agreeing to exchange the difference in an asset’s price with a broker. The difference is calculated on the price when a trade opens and when it closes. If the price moves in the investor’s favour, they make a profit. If the opposite occurs, the investor incurs a loss. An investor can trade long, or buy, if they expect the price to rise and short, or sell, if they think the price will fall.
For instance, an investor opens a CFD on gold at AED 2000 per ounce. If they purchase and the gold’s price rises to AED 2500, they earn a difference of AED 500 per ounce multiplied by the position size. If the price of gold falls to AED 1500, they lose the difference. It is important to remember that investing in CFDs does not create ownership in any asset.
How Can Choosing to Trade CFDs in Dubai Benefit Investors?
Investors taking part in CFD trading in the UAE can enjoy the general benefits the instrument offers along with a Dubai advantage. They are as follows:
Accessing Global Markets:
Investing in CFDs allows investors to trade in global assets like stocks, indices, commodities, forex, cryptocurrency, and more without setting up multiple accounts. As far as Dubai is concerned, investors can rely on trading with brokers regulated by the Dubai Financial Services Authority. The DFSA is an independent regulator for all financial services conducted by the Dubai International Financial Center. Regulated Dubai CFD brokers offer access to multi-asset platforms that allow investors to trade in international markets.
Leverage Opportunities:
CFDs allow investors to open with larger positions even with a small initial deposit, especially when compared to buying an asset. Additionally, brokers in Dubai offer competitive leverage levels that allow investors to make the most of market opportunities. Since the brokers are regulated and have to adhere to DFSA guidelines, they also offer investors a fair share of protection.
Harnessing Rising and Falling Markets:
One of the perks of investing in CFDs is that they allow investors to hold long and short positions. CFDs fuction in context of larger market conditions and allow investors the chance to make the most of changing dynamics to earn a profit. If investors expect prices to rise, they can hold a long position. Similarly, if they believe that prices will fall, they can stick to a short position. In Dubai, traders can use diverse strategies to hedge existing investments. Hedging allows investors to find stability in markets that are volatile or international.
No Ownership:
A CFD allows investors to trade an underlying asset without creating any ownership associated with it. Since investors do not own the physical asset, they can avoid costs related to custody, settlement, storage, etc. Trading CFDs in Dubai is particularly advantageous for investors trading in commodities like gold or oil-both of which are heavily traded in the UAE but are expensive to store.
Tax Efficiency:
As of now, the UAE does not impose capital gains tax on individual traders earning profits. As a result, investors can trade in CFDs and maximise their profits without having to pay tax. Since Dubai offers a tax-free environment to trade in, it allows investors to significantly increase their net returns compared to other locations that levy heavy tax.
Trading Environment:
Investors in Dubai can access CFDs on forex, indices, and commodities 24×5, facilitating trade in international markets. Dubai offers unparalleled investor protection: it provides the choice between onshore regulation through the Securities and Commodities Authority and the DIFC/DFSA regulations that meet international standards. As a result, investors can access well-regulated brokers with policies that prioritise dispute resolution and segregation of client funds.
If you want to invest in assets without taking on the risk and responsibility of ownership, a CFD could be the right option for you. All you need is a trusted and regulated CFD trading platform. At Orient Finance, we help you open a trading account in just 3 quick and simple steps. Once your account is all set up, you can trade across global markets in a wide range of instruments including indices, stocks, forex, commodities, and more.
Explore our services and open a trading account with Orient Finance to invest with complete protection.