Advantages and disadvantages of CFDs:
CFDs give traders direct access to a wide range of international markets. In addition to rising prices, traders can also profit from falling prices. A special feature of CFDs is the leverage effect, with which above-average profits can be achieved. However, traders should bear in mind that leverage also affects losses. Proper risk management is therefore very important in CFD trading.
Trading every second
With CFDs, traders speculate on future price developments. It is possible to trade every second via the computer or mobile applications. Due to the strong leverage effect, investors must always keep an eye on the risk of falling prices and the associated losses.
Profit from rising and falling prices
Another advantage of CFD trading is that investors can speculate on both rising and falling prices. If the market is closely monitored, falling prices for shares, currencies or commodities can also be turned into profits.
Another advantage: dividends are also possible with CFDs
Although CFDs in withdrawal exness do not directly buy shares, dividends do not necessarily have to be foregone. If you bet on rising share prices, you can usually receive about 90 percent of the dividend paid out. In contrast, no dividends are generally paid when betting on falling prices.
Another advantage: easy access to international markets
CFDs give investors direct access to a wide variety of asset classes. For example, various studies show that Asian traders particularly like to invest in foreign stocks. In addition, many investors prefer to speculate on commodities or foreign exchange. However, the classic among CFDs is still the S&P 500 index.
The most popular investments of active CFD traders:
- International shares (18.5 percent)
- Shares in general (13.5 percent)
- Futures (11.5 percent)
- Sectors (8.5 percent)
- Commodities (8 percent)
- ETFs (7 percent)
- Indices (6 percent)
The advantages of CFD trading at a glance:
- Although only part of the purchase price of a share is paid, the full price gain can be achieved.
- Higher profits possible than with traditional investment in shares.
- Lower capital investment
- Leverage factor enables above-average profits
- Relatively simple and very transparent trading
- Profit from different market changes
- Receipt of dividends possible
- Direct trading with the provider
Are there also disadvantages to CFD trading?
The leverage effect affects not only profits but also possible losses. This makes trading CFDs a relatively risky investment. If the available credit is not sufficient to cover the losses, the trader is asked to inject new capital. Since options can be transacted within a few seconds, the market requires a particularly high level of attention from the investor.
Expert Tip:
It is precisely the leverage that ensures that many traders get carried away. It is therefore important to keep an eye on good money management when trading CFDs.