CFD trading is a highly popular method of financial trading which has over the last ten years grown in prominence. If it is something that interests you, then you will undoubtedly know the basics of the trading method. Rather than buying shares in a company, CFD traders trade on the value of these shares. In a way, they are speculating on whether the value of the shares will increase or decrease over a set period of time.
As with all matters financial, the question of ‘Can I make a profit from CFD trading?’ is often asked. The answer to this query is hardly straightforward. For one thing, the author of this piece would be loathed to answer ‘Yes!’, as there is always a chance that something could go wrong in CFD trading, or any form of trading for that matter. In addition, whether you make a profit or not will depend on many external factors.
There are scenarios whereby you could make an accurate prediction about a stock and consequently make a profit from CFD trading. However, this is never guaranteed to be the case. For instance, you might believe the value of a particular set of shares to be about to fall, based on the research you have carried out, and so engage in CFD trading based on this premise. However, circumstances beyond your control might subsequently arise to make the value of said shares increase rather than decrease. In this case, you would not profit from CFD trading.
It is also important to mention that CFD trading is a leveraged product. Such a product only requires a small fraction of its value to be placed as a deposit. This means that a trader can place perhaps 5 or 10% of the value of the trade, but still be exposed to receiving the full value of the trade if he is successful. Thus one’s deposit can be many times magnified. Logically, the reverse is also true, hence a CFD trader can also be exposed to a loss far greater than the amount of money he initially placed.
In conclusion, it is possible to profit from CFD trading, but it is not guaranteed. Circumstances beyond your control, or signs you have missed, can interfere with how you believe the share price will behave, meaning that you do not make a profit in some cases.