Contract for difference – a complex and very high risk product
CFDs (Contract for difference) are a form of derivative trading that enable you to attempt to net a profit by speculating on the rising or falling prices of fast-moving global financial markets, such as shares, commodities, currencies and treasuries.
Whilst CFDS work for some people for others the effects can be devastating. Contract for difference trading can result in losses that exceed your deposits, meaning not only could you lose your capital but you could end up owing thousands.
If you use a professional stockbroker to trade on your behalf, in some cases you will be charged a commission when the trade is opened as well as closed.
The more trades that occur the more commissions you will pay and in some cases you won’t have a say in how many trades occur in any given time period. The commissions could out-weigh any profit you might make.
Unfortunately, some savers have lost their entire pension pot by using CFDS, a product they did not understand and was never suitable for their particular circumstances.
Contract for difference within a pension should only be used by high net worth individuals who have other vehicles to save for retirement and have capacity for loss.
The Government’s free and impartial money advice website has some CFD questions that you should consider in relation in using CFDs as an investment vehicle.
If you’ve been advised by a regulated IFA to move your pension pot into a SIPP in order to trade CFDs or simply lost money through a regulated Contract for difference trader, TLW maybe able to help.