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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.

Onyx Markets CFDs (Contract For Difference)

CFDs (Contract For Difference)

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What is a CFD?

CFD trading allows you to speculate on whether the price of a financial asset will go up or down. This allows you to potentially profit in both rising and falling markets, making a profit if you’re right or a loss if you’re wrong.

CFD trading is particularly attractive because it doesn’t require the same major financial outlay as actually buying the asset you’re speculating on. The price you pay depends on the margin, which is typically a fraction of the asset’s value.

Benefits of Trading CFDs

  • Leverage: CFDs allow you to control a large position with a smaller initial investment. This can amplify potential profits but also increase potential losses.
  • Access to diverse markets: With CFDs, you can trade a wide range of assets, including commodities, currencies and more all from a single platform.
  • No ownership of assets: You can speculate on price movements without needing to own the underlying asset. This simplifies the trading process and avoids issues like storage costs for commodities.
  • Profit from rising and falling markets: CFDs allow you to go long (buy) if you think prices will rise or go short (sell) if you think prices will fall, giving you opportunities to profit in both market directions.
  • Low costs: CFD trading often involves lower transaction costs compared to traditional trading, as many brokers offer competitive spreads and no commissions on trades.
  • Flexible trading hours: Markets such as FX are open 24/5, allowing you to trade outside regular market hours and take advantage of global market movements.
  • Hedging opportunities: CFDs can be used to hedge existing investment portfolios against potential losses by taking opposite positions in the CFD market.

What are the Risks of Trading CFDs?

  • Leverage entails some level of risk since it can magnify your gains while also making you lose more than you had initially deposited.
  • Market volatility could make prices change extremely fast, resulting in unexpected profits or losses
  • When trading using leverage you must ensure the equity value of the account is always sufficient to cover the margin requirement of your open positions. The equity value is calculated as cash balance +/- PnL from open positions. If this dips below 100% of the margin requirement, an account will be on a ‘margin call’. Failure to meet a margin call by adding more funds onto the account may result in positions being liquidated, to reduce exposure and to bring the margin requirement back below the equity value of the account. In the event of an adverse movement in fast-moving markets there may not be time to top up the account in between it going below 100% and hitting the liquidation level. 

    Alternatively, the investment could be sold at a loss to settle the call. Rapid loss could occur in such a fast-moving environment; more so if your bet is on a losing percentage. The nature of these markets can lead to psychological stress and poor decision-making.
  • In most cases, trading costs will eat into your profits.
  • Changes to the law could alter the manner or possibility of trading altogether.

Therefore you should assess the risks and, if you trade, ensure that you only risk what you are willing to lose.