CFD Trading Strategies
Find out more about CFD strategies here
Hedging
Hedge Fund managers were among the first to use CFDs, because it allowed them to earn a profit on a stock that was losing value. The same technique is used by many investors today, who purchase short CFDs to hedge an asset in their portfolio.
Hedging allows investors to protect themselves from losses in their assets, by compensating them for predicting the losses correctly.
Example:
If you have a stock that you believe will go down in the near future, but you do not want to sell because you believe it is a good investment, you could short it and earn money from its decline.
This is considered a hedge because it protects you if the price never does rebound. Even if the price of the asset stays low, you have covered your loss by shorting it and, if it does go up, you have made a profit.
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