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CFD investent pros and cons?

 CFD stands for Contract For Difference.

What is a CFD?

Well let me start with what a CFD is not. It is not a stock. You can use this intrument with leveradge x 2 or x5 or x10 and I mostly use CFDs for shorting or longing. You do get a dividend from a CFD or if you are shorting a stock then you are going to be charged the dividend as it works in reverse.

The pros of a CFDs

A CFD gives you the possibility to make ganes regardless if the stock goes up or down. You can also trade CFDs when the market is closed. If you are trading witha x5 levrage and the stock goes up 2% your profit is 2%*= 10%!

You can also make profit when you are shorting the stock or simply use the CFD for hedging your positions if you are afraid that the market will crash.

The cons of CFDs

If you are taking leveradge or you are shorting the market any small change will amplify your losses. 

If you have no idea about day trading you better not use this instrument as over 70% of daytraders loose their money. Day trading is not investing. Day trading gives you more adrenaline, it seems easy but unless you really know what you are doing you should stay away as most likely you will treat it as gambling. Invesing is not exciting, it is slow and boring.

The next disadvantage is that CFDs come with a cost. Since you are playing with not your money a loan costs you. You have overnight fees and %.

Finally if the stock goes down you will be margine called or the broker will close your position for you with a loss if you fail to add on funds into your account or if you don't add a stop loss.

How to start investing in CFDs?

Simply open an account on online trading platforms. I reccomend eToro as the safest and easiest to set up with simple ways to deposit and withdraw funds. On eTorro you can trade both stocks or CFDs. If you use levradge x2 x5 then you are choosing CFDs. If you choose x1 then you are trading the stock.



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