Is trading CFDs more risky than trading real assets?

Any financial investment involves risk. One of the features of CFD trading is that it gives you the option to leverage your positions, allowing you to increase the amount of cash you commit to a trade by effectively borrowing from your broker. CFD trading also allows you to trade and invest in assets such as stocks, commodities, indices and crypto without owning the instrument.

Trading an asset via an unleveraged CFD has the same risk as investing in the underlying asset. On etoro, for example, you can invest in the vast majority of our assets without applying leverage.

However, trading CFDs with leverage carries a higher degree of risk. Leverage increases the magnitude of gains and losses, meaning any effects of volatility also magnify. A range of leverage options are available on etoro, giving you control over your risk profile.

In addition, holding CFD positions may incur overnight fees, which are subject to change and impact overall profitability.

In contrast, investing in real assets involves ownership of the asset, and the positions do not incur overnight fees. While real assets are also affected by market fluctuations, volatility has an increased impact on CFDs that have leverage applied.