The danger of Contract For Difference (CFD)

“Contract For Difference (CFD) allows you to speculate on the future market movements of the underlying asset, without actually owning or taking physical delivery of the underlying asset”

It’s easy you can just google to get the definition, but do you understand the danger of it?

Recently there are many brokers offer to trade US shares in their platform with minimum amount and of course, it sounds incredibly attractive but most of the brokers are just providing CFD trading. The key point in CFD is that you not owning the underlying asset, which means you do not own the shares of the company if you buy in their platform.

Those platforms provide easy execution, easy to deposit fund, low amount to trade shares (which is equal to high margin), and zero commission as the commission is just the spread of the price. The opposite what people doesn’t know the broker can manipulate the market price, widen the spread, high slippage and could potentially go bankrupt if they mismanaged their risk, which means you deposited fund will be gone as well.

The broker literally can create anything for you to trade as long as there is a demand. Trading CFD is not risky if you know how to manage it. Many people do profit from it. However, one must understand your investment objective before began their investment journey.

If you want to invest in the long term looking for shares CFD platform is not suitable. If you have a high probability-based trading strategy and wish to leverage using the CFD platform it will have added advantage and your return will simply double up.

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