tl;dr - trading CFD's is the equivalent of drag racing your drunk mate down the freeway into oncoming traffic. No self respecting adult would bother with them, CFD's are for cocaine-snorting thrill-seeking morons (like me apparently) who have no respect for risk management. Don't gamble with your savings.
What are CFDs
CFD's are 'Contracts for Difference'. Very simply, if you have a trading account with the right permissions you can trade in CFD's.
Why are they dangerous
Because say you trade $250, on a normal trade (ie stocks etc) if the price falls by 10% you lose $25, which sucks but isn't world ending. CFD's are NOT like that - they are 'leveraged' which just means that if you put up $50 your exposure is many many many many times larger than that
EXAMPLE
You buy 50 contracts on a stock that is trading at $100 a share. The stock then drops $10 in value. Your exposure is (50 * 100) = $5,000 BUT because your 'margin' is only 5% of that, the initial amount you put up is a mere $250.
So to illustrate:
Stock Trading
Initial Investment - $250
Value drop - 10%
Loss - $25
CFD Trading
Initial investment - $250
Value drop - 10%
Loss - $500
Closing remarks
These things are illegal in the US for a good reason.
CFD's are for suckers, don't listen to anything that you hear to the contrary. EU regulators say that 76% of CFD accounts lose money. Let me say that again, 76% of these things lose $&*#ing money. If the odds at the casino were 1:4 there is no fkn way anybody would go. When you trade CFD's you are essentially just gambling but with WAY WAY worse odds.Cited: https://www.iexpats.com/76-of-cfd-traders-lose-money-on-their-deals/
You can't make long investments with CFD's, they aren't a long-term strategy and they are not part of ANY investment strategy with a reasonable risk profile. Please don't make the mistake I did and get sucked into trading them, it's stressful as hell and it is pure bravado driven bullshit.
Stay safe out there folks, times are nuts
