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A comparison of a CFD and a share trade

The major difference between CFD and shares is that CFD’s are bought using leverage.

This means that you can gain a larger exposure to the movement of the share for a relatively small outlay.

Keep in mind however, that leverage will magnify a profit, or a loss, so it does carry significant risk.

  CFDs Shares
10,000 shares buy at $3.00 $30,000 $30,000
Initial outlay required      $300 $30,000
10,000 shares sold at $3.20 $32,000 $32,000
Gross Profit/Loss: $  2,000 $  2,000
Return on Investment 666% 6.66%

Note: To simplify the scenario we have not included any fees, interest or dividend adjustments. These will vary between providers.