CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.

The vast majority of retail investor accounts lose money when trading CFDs . You should consider whether you can afford to take the high risk of losing your money.

Contracts For Difference or CFDs are a popular method for trading in the financial market. Just like any contract, CFDs are created and implemented by more than one party. The first party, or the broker, offers the contract. The second party, or client, is an investor who agrees to take out the contract. This means, CFD is a contract in the financial market that allows one party to pay to another party. The payment is based on the difference of value of assets between the opening and closing of the contract. The second party or client gains profit if the price of assets moves towards favourable directions. Assets in CFDs can be stocks, commodities, or currencies.

Let’s Take A Look At An Example Of A CFD:

Let’s assume IBM stock is currently traded at £125 per share. You ask the broker to purchase 1,000 shares at £125 each. You need to pay £125,000 plus commission to buy 1,000 IBM shares. For every pound, the price of IBM stock goes up, you will gain £1,000 in profit. Also, for every pound it goes down, you will lose £1,000. This is the basic way of investing and also called as “buying the underlying asset”.

But with CFDs, you invest in IBM stocks in a different way. Instead of buying the IBM stock, with CFDs you only trade the price of IBM stock. In CFD’s, it’s stated that you will be paid £1,000 by the broker for every £1 increase in IBM stock or you pay the broker £1,000 for every £1 fall in stock value. With a CFD, you invest in IBM stocks without actually buying them. You just trade the values of the assets and you never own the assets, in this case, the stocks of IBM.

Why Choose A CFD

But, what’s the reason to choose a CFD, instead of buying assets directly? When you buy assets or commodities yourself, you need to pay 100% of the value.  In the case of investing in IBM stocks, you will need to pay £125,000 and commission to purchase 1,000 shares. Even for veteran stock market investors, it’s still a lot of money.

With CFD arrangements, you may need to provide only 10% deposit or £12,500 to the broker. If the IBM stock price goes up at the end of the contract, you get the deposit back along with the profit. If the stock price goes down, you will also get the deposit back, after being subtracted by the amount of loss. This type of investment is called “trading on margin” or leverage.

Contact CFI Financial

To learn more about investing in today’s global markets, contact CFI Financial today and speak with someone ho can answer any questions that you might have.

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Richard Wynn , 1st July 2020

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CFI Financial Group is an award winning global financial markets provider with regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads and zero commissions, professional services, dedicated support and powerful tools.

With over 22 years of group experience, and recently awarded “Best Online Financial Trading Services, Middle East” for 2020 by Capital Finance International, Credit Financier Invest brings their award-winning CFD platform to London.

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Important Disclaimer:
CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail investor accounts lose money when trading CFDs with Credit Financier Invest Limited. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest Limited provides general information that does not take into account your objectives, financial situation or needs We recommend you read our full Risk Disclaimer.

We do not currently offer our investment /ancillary services to residents of certain jurisdictions such as but not only USA, Sudan, Syria, Republic of Korea and Belgium.

CFI does not offer advice, recommendation or opinion with respect to buying, selling or holding of CFDs. We do not issue financial and/ or otherwise advice to clients.