CFDs make it possible to trade price movements without holding the real underlying asset. No shares are held in a custody account. No commodities are physically delivered to you. At its core, it’s just a contract between trader and broker predicting market movement.
At first glance, it seems easy. This is quickly complicated.
Malaysian traders often like CFDs because they offer access to many instruments from one account. cfd trading malaysia trading contest Indices, commodities, forex pairs and international stocks can be traded from a single account. Interested in US tech shares without opening a Bursa-related account? CFDs do just that. Want to short crude oil after an unexpected OPEC announcement? That is possible too. That's a very appealing characteristic.
Here comes the dangerous part. Leverage is built into CFD trading. Depending on your leverage, a small 5% move in the market could change your account by 50%. It feels fantastic when trades go your way and devastating when they don’t. The majority of retail CFD traders fail to make any profit. That is based on real regulatory data. That is why regulators openly publish trader loss percentages.
Malaysia is still working towards greater clarity regarding CFDs. Malaysia’s Securities Commission is tightening regulations around derivatives. Many offshore brokers still offer CFD services to Malaysians, but they operate in a regulatory grey area. Should problems occur, traders using offshore brokers may have very limited protection.
New traders are continuously taken aback by the overnight financing charges. Keeping CFD positions open overnight usually incurs daily fees. Traders usually refer to it as a swap charge or rollover fee. Day traders may barely notice these fees. Spend weeks in a position and those fees will slowly devour your profits like termites in a timber house.
Managing risk properly is non-negotiable in CFD trading. It is not an option to not have stop-loss orders. A stop-loss can be the difference between survival and account destruction. Sudden price gaps may result in trades closing far worse than expected.
Use smaller leverage ratios in the beginning. Seriously. Leverage of 1:5 or 1:10 gives you room to survive mistakes. Avoid chasing huge profits after only a few lucky weeks.
Disciplined traders who study the markets carefully tend to survive longer in CFDs. If you're seeking quick cash, this instrument will let you know about that in a hurry.