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What are benefits and risks of using CFDs to trade? Let's look at some of the the advantages and disadvantages of using CFDs to trade. A CFD is a contract for difference. A CFD is a contract for the difference in price in the asset between now and some point in the future.
The Pros and Cons of Trading CFDs
Advantages
- Margin Trading (leverage allows you to control bigger positions than what otherwise would be possible with a normal broker)
- No Stamp Duty
- Ability to go long or short (i.e. being able to profit from falling prices)
- Useful for hedging
Disadvantages
- No Voting Rights
- Easy to over-leverage
- No Market Impact
- Financing charge for holding overnight positions.
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