What are CFD certificates?
CFD certificates are a type of high risk leveraged financial instruments. They make it possible to earn or lose a lot of money from small market movements. CFD certificates are extremely high risk and you expose yourself to theoretically unlimited loses when you trade with them. You can lose more money than you invested when trading with CFD certificates. You can also lose more money than you got in your trading account. If this happens then you are obligated to deposit more money into your account to cover your debt.
Most brokers will margin close your position if the money in your account is no longer enough to cover your loses but you can never rely on that they will do this. They have no responsibility to do so and sometimes it can be impossible to close your position before you accumulated large losses. This is especially true in a fast moving market.
CFD certificates are designed for day trading and a large majority of all positions are closed the same day they are opened. You are allowed to keep your positions open over night but if you do then you will have to pay an overnight fee for every night you keep your position open.
How does it work?
CFD certificates are based on an underlying asset. It is the market value of this asset that governs the CFD,. When you buy a CFD you will not buy the actual asset. Instead you will obtain the right to and obligation from the change in the market movement. If the market value goes up then you will have the right to the difference between the value of the asset when you opened the position and when you closed it. If the asset loses in value then you will be obligated to cover the difference and you will therefore lose money. There are Bear certificates that works the opposite way. If you buy a bear certificate then you will earn money if the value goes down and lose money if it goes up.
The large benefit of CFD certificates is that most brokers allows you to trade with leveraged CFD certificates. This allows you to expose your self to larger risk and opportunity without needing to invest large sums of money. If you trade a leverage CFD then all loses and gains will be multiplied by the leverage. If you buy a CFD with leverage 1:30 and the underlying instrument gains 1% in value then you will earn a 30% return on your investment.
You need an account with a CFD broker to be able to trade CFD certificates.
Can you earn money?
Yes you can earn very high returns on your investments. There is no limit to how much money you can earn while trading with CFD certificates. I know a guy that turned 2k into 2 million in less than 3 months. He did however also end up losing most if during the coming 6 months. He is the perfect example of how you can earn and lose large amount of money very quickly when trading these certificates.
Who should trade ?
CFD certificates are not for every one. They are not suitable for people who are looking for a low risk alternative. They are also not suitable for people who are looking for a long or short term hands off investment.
CFD certificates are only suitable for traders who have the time and skill to be able to use them responsible. A CFD position should never be left unsupervised and unless you are able to monitor your open positions you should never trade CFD certificate.
With all this being said. CFD:s are an excellent tool for day traders that allows them to be able to make a lot of money in all market conditions. Using CFD:s allow you to make a living as a day trader without the need for large amounts of money to start with. If you use CFD:s you can start day trading with as little as 10 000 in the bank. More is better.
Is it a scam?
No CFD certificates are not a scam. There are a number of well regarded brokers on the market. Many of the best brokers are regulated under UK law which guarantees honest trading.
With this being said. There are scam brokers on the market that trade with products that they claim are CFD certificates but that aren’t hedged on the open market and that are designed to cost you money. Avoid getting scammed by trading with a large well regarded broker.
Do you recommend?
CFD certificates can be a very powerful tool. They can allow you to make a lot of money in almost any market condition. I can however despite this not recommend CFD:s to anyone. CFD certificates are only suited for a very small percentage of all traders that has the time to learn how they work and the time to use them correctly. CFD certificates are extremely risky to trade with and you can quickly accumulate very large losses. You can lose more money then you have. I therefore recommend that everyone stay away from CFD certificates. If you think you have what it takes to become a successful trader then I recommend that you start by using a demo account before you start trading for real money.