CFDs enable traders to speculate on the rise and fall in commodities, currencies, and other financial assets while only investing a fraction of their capital.
The traders are leveraging their investments in the hopes of making more money. CFDs require investors to take a measured amount of risk when making a trade, sometimes as little as 1%—the rest being covered by most UK CFD providers also provide access to free demo trading account with demo money.
Though traders invest 1%, they are liable for 100% of the trade’s losses or gains.
CFD providers and for various underlying assets.
This fact can make CFDs seem very attractive. Even if the traders don’t have the equity to buy the underlying asset, they can gain potential losses based on that asset’s value.
However, because they are trading with leverage, the gains and losses are magnified—and the risks are much higher. Traders might end up losing much more than they put in.
Tags: Leverage
Alex Jones