A CFD mirrors the performance of a share or index and offers the benefits of trading shares without having to physically own them. It is traded on margin, and just like physical shares your profit or loss is determined by the difference between your buy price and your sell price. However, CFDs offer many benefits over and above physical share trading. This section seeks to explain these.
Originally used by large institutions to cost effectively cover their equity exposures, CFDs are now a commonplace trading tool used by retail investors around the world.
CMC Markets is largely responsible for making the advantages of CFDs widely available to a retail audience. An ever expanding number of retail investors use CFDs both as part of their trading portfolio and as an alternative to physical share trading. This group includes both short-term frequent traders as well as long term investors looking for a flexible alternative to margin lending.
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