More trading power
Investors can use CFD as a diversification tool because it allows them to trade from margin requirements as low as 1% for selected Assets trading with CFDs. This allows them to make their capital work harder for them and possibly achieve higher return on equity.
For example if stock ABC is trading quoting at: $700 USD per share
Using conventional stocks trading, investors would need $700 USD to buy a single Share. Using CFDs Leverage, our investors can trade the same Share with just $7 USD (assuming margin requirements of 1%).
This effectively frees up his capital for other investments such as Real Estate, Futures, FX trading, ETFs, Unit Trusts, Insurance, and so on.
Investors could have only bought 1 of a blue chip stock in the normal cash market, but using the same capital, they could strengthen their portfolio by buying up to 100 lots of the same stock with CFD.
By using leverage, the investors can multiply their profits as much as the value of the leverage they use.
Trading on leverage is a double-edged sword, as it is possible to lose the margin requirement, which is why prudent to consider the risks involved in each trade.