CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
February 16, 2016
A CFD is a 'contract for difference' between you and your broker. You choose the shares, indices, currency pairs or raw materials you want to buy or shorten and your broker finances your transaction. So, the broker is your counter-party.
The CFD is a contract with which you receive the difference between the purchase rate and the selling rate.
If the position does well, you make a profit. If it doesn't go well, you take the loss. The broker only finances the position, the risk is all on you.
Not only the position in itself creates an exposure to risks in the price of the asset that can move against you, but the contract in itself is also a risk: you make an agreement with your broker, and it should preferably be a very reliable broker!
Some numbers:
Plus500 exists since 2008, and they are listed on the Main Market of the London Stock Exchange.
In 2014, Plus500 had a net profit of 102.5 million Euros and the capital amounts to over 100 million Euros. Among others, Plus500 is regulated by the Financial Conduct Authority (FCA) in England.
