- With CFDs, you can open a long or short position in a wide range of Underlying Assets that are normally not accessible or available for retail customers. For example, underlying assets such as EUR/USD.
- They let you trade without having to put up the full cost of the underlying asset, depositing only the Margin required for the trade (leverage).
- Ease of execution.
- Negative balance protection: your maximum loss is limited to the capital deposited in the CFD cash account.
What are CFDs?
CFDs are difference contracts between two parties in which the buyer agrees to pay to the seller the difference between the current value of an Underlying Asset and its value when the position is closed, multiplied by the agreed number of contracts. In other words, when you trade using CFDs, you are not buying or selling the Underlying Asset itself. On top of this operation, the currency conversion to euros would have be considered if the underlying asset is traded in a non-euro currency.
CFDs are also leveraged, meaning they let you trade without having to put up the full cost of the underlying asset, depositing only the Margin required for the trade. This feature of CFDs can be both an advantage and a disadvantage at the same time, since it makes this financial instrument a complex, high-risk product, meaning the investor can quickly lose their money due to the leveraging effect.