Joey Ting asked 8 years ago

Hi PC, any thoughts or experience on CFD? especially for trading short-term

1 Answers
pcwong Staff answered 8 years ago

You have to be very careful when you play CFDs because it is a leveraged product. Many brokerages offer such a service. But if you are keen, make sure you have your stop loss. Many tried to promote it buy spouting a low capital outlay and a 1 cent gain ina US$1 stock is equivalent to a 10% gain in your capital if the leverage is 10x. But any movement on the opposite you could lose a lot too.
I played CFDs occasionally but being a long term investor myself does not suit my risk appetite because CFDs contravene against my buy and hold philosophy.
If there’s one leveraged play that I use it is “etoro” where I can dictate how much leverage I want. Link:
If I want to buy and hold I can select a 1x leverage. If I want higher risk exposure I can change the leverage to 5x or 10x. Most other CFDs have prefixed leverage of 10x and you have to be very fluid to make money.
Just my thoughts.