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CFD Trading In Argentina

Written By

Michael MacKenzie

Written By

Michael MacKenzie

Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.

» Michael MacKenzie Profile Page

Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

» James Barra Profile Page

Fact Checked By

Jemma Grist

Fact Checked By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

» Jemma Grist Profile Page

Updated

Oct 21, 2024

Argentina’s economy has suffered from high inflation and a sliding peso over the years, but with a strong service sector, developed industrial base and high agricultural exports, active traders have plenty of scope for profit when they have the right trading product.

Cue contracts for difference (CFDs), which allow you to take advantage of the country’s strong points to make leveraged trades on currencies paired with Argentinian pesos (ARS), stocks like Mirgor, commodities like soybeans and other global markets – without owning the underlying asset.

Read our beginner’s guide to CFD trading in Argentina for all the information you need to know before diving in.

Quick Introduction

• CFDs offer traders the opportunity to profit from price movements in various assets – including Argentine and global stocks, currency pairs, commodities, and indices.
• The Comisión Nacional de Valores (CNV) oversees Argentina’s CFD trading sector. It plays an active role in overseeing CFD brokers and imposes measures to protect retail day traders.
• In Argentina, traders can use leverage to increase their exposure, amplifying the potential return of their positions using borrowed funds. However, it requires strict risk management.
• Profits from trading CFDs are generally taxable for individuals in Argentina at the progressive income tax rate of between 5% and 35%.

What Is CFD Trading?

CFDs are popular derivatives that traders use to speculate on price movements of assets such as currency pairs, stocks traded on the Buenos Aires Stock Exchange like MercadoLibre, indices such as S&P Merval, which tracks the performance of the Argentinian stock market, or key commodities like soybeans.

CFDs allow traders to profit from both upward and downward price movements of an asset. You can take a long position with a “Buy” order, or go short by opening a “Sell” order.

That doesn’t involve actually buying or selling the underlying asset, though; instead, the CFD is an agreement between two parties that one will pay the other the difference between the price when the contract is executed and when it ends.

A key aspect of trading CFDs is the use of leverage, which allows traders to increase the size of their position using borrowed funds.

Suppose the S&P Merval index was trading at ARS 18,000. Using leverage of 1:10, you could control a position this size with just ARS 1,800 by borrowing the rest.

That means that if the index rises by 10% to ARS 19,800, you would earn the full ARS 1,800 (minus brokerage fees), rather than the ARS 180 profit you would make without using leverage.

Losses are also amplified in leveraged trades, and these can quickly mount and wipe out your trading funds.

It’s important to guard against extreme losses, so choose a broker that offers negative balance protection and exercise risk management techniques by controlling your position sizes and setting stop loss orders.

Michael MacKenzie

Author

What Can I Trade With CFDs?

Almost every asset class can be traded using CFDs. The most common include:

• Stock CFDs like shares in Argentinian companies such as Pampa Energía as well as international stocks.
• Index CFDs like the S&P Merval track the performance of a country, sector, or even specific products like soybeans, one of Argentina’s biggest exports.
• Forex CFDs though the high inflation and volatility make trading ARS very difficult. Still, major forex pairs like EUR/USD are commonly traded.
• Commodity CFDs because alongside widespread commodities like oil and gold, traders in Argentina can focus on some of the country’s rich agricultural products such as wheat, corn, soybeans and cattle.
• Crypto CFDs given Argentina is South America’s leading adopter of cryptocurrencies. Many locals use digital currencies to hedge against peso devaluation. Crypto CFDs can be a rewarding but very high-risk way to profit from short-term price swings.

Is CFD Trading Legal In Argentina?

In Argentina, CFD trading is legal, and brokers operating in the country are regulated by the Comisión Nacional de Valores (CNV), which supervises almost all over-the-counter (OTC) derivatives trading in the country.

The CNV licenses a number of popular local trading companies in Argentina. However, some traders sign up with internationally regulated brokers to access specific assets they want to trade or to benefit from their services and execution quality.

If you do choose an international broker, aim for one that has a large market presence, a good track record free of scams, and regulation by at least one of our ‘green-tier’ organizations like the UK’s FCA or ASIC from Australia.

Michael MacKenzie

Author

Getting Started

1. Choose a Reliable Broker: Look for a broker regulated by the CNV or another respected international authority. We also recommend checking the broker’s time in the industry, number of clients and track record.
2. Register and Fund Your Account: You’ll need proof of ID such as your Documento Nacional de Identidad (DNI; National Identity Document) to sign up. Consider a broker that accepts the Argentine peso or makes cross-currency transfers easy using a popular e-wallet like Mercado Pago.
3. Select Your Markets: From local stocks like Telecom Argentina to global commodities like soybeans, carefully research the market you want to trade on a reliable platform and practice using a demo account before staking real pesos.

An Example Trade

To demonstrate how a CFD trade might work, let’s look at soybeans, one of Argentina’s most important export commodities.

My main CFD day trading strategy involves waiting for news and events that I think will impact markets. I look for circumstances that might cause a reversal in the current trend and bet on that reversal. I primarily look for long positions to avoid the higher risk that short selling involves.

Having observed soybeans prices falling from USD 1,020 to around USD 970 over the past week – the lowest price since August of that year – I consider the possibility of a price reversal with a considerable upside.

To check out this hunch, I do a deep dive into information that I think might impact soybean prices.

While reports of good harvest weather in the US and South America might cause downward pressure on soybean prices, I consider that the US harvest season is almost over, limiting the impact of this news.

On the other hand, I believe news that Russia will set a bottom limit on grain export prices may drive up soybean prices. Although this news is about wheat in particular, Russia is also a major soybean producer, so any move to cut discount agricultural exports could also impact sentiment here.

There’s also an upcoming US weekly export sales report on Friday, which could push prices up if the figures are high.

I feel there’s a good chance that prices will rise on positive export figures, so I do some basic technical analysis. The relative strength index agrees with my hunch that soybean futures are oversold, so I open a CFD at around USD 975.

I set a stop loss at USD 965, and a take profit order at USD 985. This limits the amount of profit I can earn on this trade, but it also ensures I won’t lose a large amount if the price of soybean futures continues to fall.

In this case, the price reverses as I predicted and I earn USD 10 per futures contract in my trade. These are relatively small gains, as I’ve practiced tight risk management in line with my day trading philosophy, which favors consistency and discipline over frequently chasing high gains.

Bottom Line

Despite economic difficulties, Argentina offers a favorable environment for CFD traders with access to both local and international markets.

Traders can take advantage of diverse market opportunities but should remain aware of and manage the risks posed by high volatility and a troubled peso.

To get moving, use DayTrading.com’s choice of the top CFD day trading platforms.

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