For which investors is CFD trading suitable?

CFDs are a leveraged form of investment that can generate high profits but also losses in a relatively short time. Therefore, CFDs may not be suitable for every type of investor. It is very important that the risks involved are sufficiently understood.
Finding the right CFD broker

CFDs involve the use of leverage. Our comparison shows you which CFD brokers are particularly safe thanks to measures such as the exclusion of a margin call or guaranteed stop-loss orders.

Only investors willing to take risks should invest in CFDs

CFDs are considered direct competitors of leverage certificates and warrants. Ideally, all three forms of investment yield disproportionately high profits. In direct comparison, however, CFDs offer additional advantages, e.g.:

•     the low order fees,
•     a saved search for suitable products, as there is only one CFD per underlying,
•     a comprehensible price development, as time value loss, volatility or knock-out thresholds do not play a role, as well as
•     the variable amount of leverage.

It must always be borne in mind that CFDs remain an extremely risky business. An investor in a CFD with a leverage of ten must reckon with a total loss in the event of a ten-percent price drop, whereas a leverage certificate or warrant can recover over time, depending on its design.
Without hedging you can lose more than your deposit

It becomes really expensive if you are not careful. If the price of the CFD moves against the desired direction, losses can be greater than the capital invested.

Normally, however, your broker will protect you in the best possible way by automatically "closing out" the positions threatened with total loss by means of an offsetting transaction.

However, if the loss can no longer be covered by the available credit on the account, the broker sends a so-called margin call. This contains the information that fresh capital must be provided immediately. Otherwise, the broker will close the position for security reasons. Accordingly, you should always have enough "cash" in your account!

However, you can limit the risk of loss by setting stop and limit orders. Nevertheless, CFDs are highly speculative and only suitable for investors willing to take risks.

The broker should be chosen carefully

Another trustworthy matter when trading CFDs is the selection of a CFD provider. In case of insolvency, the investor's deposits are only protected up to a certain amount.

Therefore, especially when trading CFDs: as a potential investor, find out exactly which provider you are dealing with and what experiences other investors have already had with the respective provider.

For this reason, exnessbroker.net always provides you with up-to-date information and gives you valuable tips on choosing the right strategy.

As great as the fascination of CFDs may be for investors, coupled with the desire for quick and easy money, the following always applies: Watch out! Only a good CFD broker as well as sufficient experience and discipline will protect your investments from higher losses.