March 27, 2023

 What is a CFD?

CFDs (Contracts for Difference or Contracts for Difference) are highly speculative derivatives and are only suitable for very well-informed investors who are aware that the increased opportunities are also associated with increased risks.

Even with the appropriate level of knowledge, investing in CFD products is always a very speculative investment, as you can open large trading positions in the market with little capital investment. The considerable risks of this investment cannot be completely avoided.

The table shows that CFD Trading not only belong to the category of leverage products, but can also lead to significant price losses. However, losses are limited to the available balance on the CFD account.


We therefore advise you to deal in detail with the general functions, mechanisms, products and markets in the securities business, since CFD Trading is essentially based on these.


In addition, it is important that you keep an eye on the changing influences on your investments in the future and keep yourself informed about current developments.

The difference between stock and CFD trading:

Stocks are probably the best-known securities and represent the shareholder’s share of the company’s equity. The rights and obligations of the shareholder are regulated in particular in the German Stock Corporation Act (AktG).

In contrast, the purchaser of CFDs ( Contracts for Difference ) is not involved in a company, but merely the owner of a claim. As a so-called derivative, the price of CFDs is derived from an underlying asset, which is often shares, but also other assets (eg indices or commodities). Unlike the share investor, the CFD investor is only involved in the price development of the financial instrument. CFDs thus belong to the group of financial contracts for differences.

CFDs are OTC products:

CFDs are usually traded over the counter. This means they are traded “Over the Counter” (OTC). For CFD trading at comdirect, this means that your order is not processed on an exchange, but directly with the trading partner Société Générale. Société Générale itself secures the entire excess position (exposure) on the market (it operates “hedging”).


How CFDs work:

With CFDs you have the opportunity to move more capital on the markets with the same capital investment than with a direct investment in an underlying asset. In addition, with CFDs you can participate in both rising and falling prices of different underlying assets. The trading result (profit or loss) is calculated from the difference between the entry and exit price of the CFD.


Characteristics of CFDs:

no order fees (except for stock and futures CFDs).

transparent product.

no limited terms (except for futures CFDs).

no loss of time.

participate in rising and falling prices.

Trade high volumes with little capital investment.

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