Stock trading and CFDs are both forms of trading where a trader can buy or sell shares in a company or a ‘futures contract’, an agreement to buy/sell commodities at a price established earlier on a future date.
Both methods require the investor to speculate on the performance of an asset, whether stock prices or commodity prices, for example. There is no need to physically purchase the share or trade in either case. It is done by investors speculating on changes in price movements.
What is stock trading?
Stocks are shares in companies that allow investors to purchase ownership fractions in these companies. These can be highly profitable since many large corporations generate billions of dollars per year. People often confuse stock markets with other investment forms like Forex or other international markets.
The main difference between stocks and other types of investments lies in the fact that the stock market goes up and down depending upon supply and demand factors which result from the fact that anyone can buy stocks.
You need to know if deciding on investing in stocks because thousands of companies are listed on numerous exchanges worldwide. Still, not all of them are trading on Romanian Stock Exchange (BVB). It’s vital to remember that every economy has its market dynamics, so it would be wise not to compare the stock prices of companies listed in Romania with those listed anywhere else.
What is CFD trading?
Contracts for differences are financial derivatives that allow people to speculate on the price direction of an underlying asset without actually buying it. So when traders make a deal using CFDs, they will only gain (or lose) the difference between the current market value and what they bought the CFDs for. This provides greater leverage than might otherwise be possible with traditional stock trading and is most commonly used in markets like Forex, where you don’t need to access your asset until some arbitrary time in the future.
The most popular way to trade contracts for differences is through online platforms. However, most brokers still require you to open an account and meet minimum investment requirements before allowing you to do anything other than practice.
Stock trading and CFDs in Romania
The Romanian forex market has traditionally focused on CFDs vs. stock trading. In January 2015, the Bucharest Stock Exchange suspended all trading due to a lack of activity. Romanian authorities have been improving conditions by reducing commissions and taxes on transactions, but overall liquidity will be low until more active traders.
Romania has a relatively small population of around 20 million, so it is not surprising that fewer companies offer shares for sale. Furthermore, the local economy has struggled over recent years, which was reflected in much lower share prices leading up to this point.
Romania currently has two leading indices; Sibex (representing the blue-chip companies on the bourse) and BET (the most liquid, high capitalization index). The FTSE/ASE 20 Index is also available under the ticker ARCA. Romania’s main sectors are construction, consumer goods, and food and beverages.
Trading stocks or CFDs carry a certain amount of risk, but choosing one over the other depends on how much investors want to risk and whether they have the time to read the news and keep up with industry trends. Not everybody can become an expert at CFDs overnight, which means research is required before investing natural capital. On the other hand, if you’re already pretty confident about making your first steps into stock trading or plan on sticking around for a long time, it would be best to get in touch with a Saxo Bank broker who can guide any new CFD trader in Romania through the initial stages of opening an investment account.