With CFDs, you can profit from price changes without directly owning the asset itself. No physical ownership is involved. No commodities are physically delivered to you. It is simply an agreement between you and the broker about future price direction.
At first glance, it seems easy. The simplicity disappears almost immediately.
One major reason CFDs attract Malaysian traders is the broad market access they provide. https://www.fxcm-markets.com/insights/the-beginners-guide-to-cfd-trading-in-malaysia/ A single CFD account can provide access to indices, commodities, forex, and international stocks. Desire exposure to US tech stocks without having to deal with Bursa? CFDs do just that. Trying to short oil when OPEC creates market volatility? You can do that with CFDs too. That wide access is extremely appealing to traders.
This is what hurts. Leverage is built into CFD trading. With a 5% change in the underlying asset, you may experience a 50% change in your account, depending on the leverage ratio. When you are correct, leverage magnifies profits, but it also magnifies losses. Most retail CFD traders never become profitable. Not an opinion, but a fact. That's the reason why regulators in several countries publish that statistic.
The Malaysian regulatory environment for CFDs is still becoming clearer. The Securities Commission is stepping up its regulation of derivatives. Offshore CFD brokers continue targeting Malaysian traders, though legal protections may be unclear if problems happen. When something goes wrong with offshore platforms, you may discover there is little protection available.
New traders are continuously taken aback by the overnight financing charges. Keeping CFD positions open overnight usually incurs daily fees. It's referred to as a swap fee or rollover fee. It's insignificant for short-term trades. Leave trades open for weeks and the fees can slowly eat away your profits.
Here, risk management is a must. It is not an option to not have stop-loss orders. They often determine whether a losing trade stays small or destroys your account. Gap risk exists — markets can gap up or down quite a bit from the previous day's closing price and you may have to wait for the market to close before you realize that you have missed the stop.
Beginners should always begin with conservative leverage. No exaggeration. A 1:5 or 1:10 ratio will allow you to be wrong without being ruined. Don't take the risk of getting the big wins with just three weeks of beginner's luck.
CFD trading rewards patience, discipline, and continuous learning. If you only want fast money, CFDs will punish that mindset quickly.