CFD Trading Options UK are financial derivatives that allow traders to speculate on the price movements of an underlying asset, without taking ownership of the actual asset. They offer leverage (up to 50:1), which magnifies potential profits as well as losses. As a result, they are considered high risk investments and only experienced traders should consider trading them. Traders should always be fully aware of the risks involved in CFD trading and trade only with money they can afford to lose.
Traders buy or sell units of a CFD instrument, depending on whether they expect the price to go up or down. For example, if you think that the FTSE 100 will rise, you would open a ‘buy’ trade on the index. For every point that the FTSE 100 rises, you will make profit. However, if the index falls, you will make a loss.
CFD Trading in the UK: Exploring Your Platform Options
The key benefit of CFD trading is that you only need to put up a small percentage of the full value of your trade to open a position, known as margin. This means you can open a trade on the FTSE 100 with only PS250 in your account, whereas to buy the same amount of shares you would need to deposit over PS200,000.
This enables you to diversify your portfolio with a wide range of assets, without having to invest large amounts of capital. As CFDs do not involve the direct purchase of an underlying market asset, they are exempt from stamp duty in the UK*. They also provide a range of risk protections such as basic and guaranteed stop losses, plus hedging functionality.