What are Contracts for Difference?
Contracts for Difference (CFDs) are a financial products that allow an investor to trade the difference in price in a wide range of markets using leverage that can magnify profits and losses.
Main Features:
Leverage
The leveraged nature of CFDs means an investor can gain exposure to shares, commodities, currencies, indices and bonds by using relatively low deposits as margin. Leverage means investors can make their money work harder but also makes CFD trading a high risk/reward investment as small movements in price can cause big swing in your account value.
The ability to ‘short’
Shorting means taking out a short sell position on a particular market to profit from any potential decline in price. This particular strategy can be useful in times of volatility but investors must beware of the risks of shorting a stock that could potentially double and lead to losses more than the initial deposit.
Wide range of markets
You will see from the comparison tool above that CFDs enable you to trade entire indices, individual shares and major currency pairs, this is only the beginning. As Contracts for Difference have become more popular, brokers have expanded their tradeable markets to include bonds, interest rates, exotic FX pairs, options and even pre-market IPOs.
Charting
Most reputable brokers and platforms will have charting packages included for free. To find the one that best suits you it may be worth opening a few different accounts and testing the functionality. A large proportion of investors will be satisfied with all of the platforms contained in this comparison so charting may not swing the decision on which platform to use.
Investors looking for specialised technical analysis indicators, which are slightly more complex than moving averages and relative strength index, will find also find great software in many of the platforms included in the review and comparison.
