What is CFD trading?

Contracts for Difference (CFDs) are a great way to trade derivatives in financial markets, such as shares of public companies, currency pairs, commodities, and indices. Those who trade CFDs can speculate on the price movement of underlying assets without actually owning those assets, instead speculating from the rise or fall in prices with cash settlement.

Calculating CFD Returns/Losses

The way that your returns/losses from a CFD trade are calculated concerns only the price change of the underlying asset, and the agreement is handled between the buyer and seller exclusively, without an exchange.

When you trade CFDs, you’re predicting how the asset will move. Buying a CFD indicates that you’re expecting the underlying asset to gain in price. Selling a CFD means that your returns will come from the asset’s declining price. Remember that just because you don’t own the asset, negative returns from CFDs can still impact your trading capital, so make sure you properly research the underlying asset and its market performance before establishing a position.

Reaping the Rewards of CFDs

CFDs have gained in popularity because they don’t require traders to own underlying assets or use institutional exchanges, which allows them to participate in global markets they may not have had access to previously. Furthermore, in the case of certain assets like shares of companies, there is no need to go to the broker and find shares to borrow to short.

Instead, establishing long or short positions can be conducted instantaneously during regular hours. Either because of their geographical location, margin requirements, or restrictive regulations, traders can establish long or short positions within an immense array of assets thanks to CFDs.

With a wide range of options represented by CFDs available, traders can trade on wide range of different underlying assets including precious metals, commodities, stocks, indices, and even cryptocurrencies.

Please note: CFDs are leveraged products that involve substantial risk and may result in the loss of your entire balance.

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Risk warning: Contracts for difference (‘CFDs’) is a complex financial product, with speculative character, the trading of which involves significant risks of loss of capital. Trading CFDs, which is a marginal product, may result in the loss of your entire balance. Remember that leverage in CFDs can work both to your advantage and disadvantage. CFDs traders do not own, or have any rights to, the underlying assets. Trading CFDs is not appropriate for all investors. Past performance does not constitute a reliable indicator of future results. Future forecasts do not constitute a reliable indicator of future performance. Before deciding to trade, you should carefully consider your investment objectives, level of experience and risk tolerance. You should not deposit more than you are prepared to lose. Please ensure you fully understand the risk associated with the product envisaged and seek independent advice, if necessary. Please read our Risk Disclosure document.

 

Regional Restrictions: IOS INVESTMENTS Limited does not offer services within the European Economic Area and Switzerland as well as in certain other jurisdictions such as the USA, British Columbia, Canada and some other regions.

 

IOS INVESTMENTS Limited does not issue advice, recommendations or opinions in relation to acquiring, holding or disposing of any financial product. IOS INVESTMENTS is not a financial adviser.