Pros and cons of contract for difference

The contract for difference has its pros and cons which you need to know before you decide to start trading on it. They include the following:


  • The CFDs are known to allow the investors to trade the price movement of assets that include stock indices, ETFs, and the commodity futures
  • The CFDs are believed to offer investors with all of the risks and benefits of owning a security without truly owning it.
  • CFDS utilize leverage to allow investors to put up a smaller percentage of the trade amount that they have with a broker.
  • CFDs allow the investors to take short or long position easily or a sell and buy position


Apart from the above pros that you will get from using CFDs, the following are its cons:

  • Although it is possible to amplify the leverage gains with CFDs, losses can also be magnified by the same leverage
  • The extreme price fluctuations or volatility can lead to wider spreads that happens between the ask (sell) and the bid (buy) pries from the broker
  • The industry of CFD is not regulated well, which USA don’t allow, and the traders have to rely on the reputation and credibility of the broker.
Fenix Dallon
the authorFenix Dallon