What Are The Pros And Cons Of CFD Trading?

CFD trading allows you to speculate on the price movements of various financial instruments. Looking to trade CFDs? Click here to read about the pros and cons.

• Question 01

  What is the advantage of "going short" in CFD trading?

  Your Answer

  • A.It requires borrowing additional funds

  • B.It incurs additional borrowing charges

  • C.It allows earning from a fall in asset prices

  • D.It involves physical delivery of underlying assets

• Question 01

  Why do CFD traders not incur additional borrowing charges when going short?

  Your Answer

  • A.Because they have to borrow additional funds

  • B.Because CFDs involve physical delivery of assets

  • C.Because shorting CFDs does not require borrowing anything

  • D.Because CFD traders always pay the full cost upfront

• Question 01

  3.What benefit do CFD traders gain in terms of trading costs?

  Your Answer

  • A.Higher tax bills

  • B.Lower trading bills

  • C.Additional borrowing charges

  • D.Requirement to pay stamp duty

• Question 01

  What is the potential downside of leverage in CFD trading?

  Your Answer

  • A.It limits potential losses

  • B.It requires a large initial investment

  • C.It can amplify losses

  • D.It results in low volatility

• Question 01

  How is CFD trading different from trading other financial instruments in terms of regulation?

  Your Answer

  • A.CFDs are traded on exchanges

  • B.CFD trading is less complex

  • C.CFD trading has stronger consumer protection

  • D.CFD trading is regulated differently and may have varying levels of oversight

• Question 01

  What is a potential challenge associated with the high volatility in CFD trading?

  Your Answer

  • A.Low trading complexity

  • B.Limited price swings

  • C.Difficulty in managing significant price swings

  • D.Increased regulatory oversight