Do professional traders use CFDs?

Some professional traders use CFDs for three purposes: short-term speculation, hedging, and access to multiple markets without owning the underlying asset.

1. Short-term speculation

Some professional traders use CFDs to gain leveraged exposure to market movements over shorter timeframes. Because CFDs can be traded long or short, they may be used to express views on both rising and falling markets. However, leverage increases both potential gains and potential losses.

2. Hedging

Some professional traders use CFDs as part of a hedging strategy to manage exposure to adverse market movements. For example, a short CFD position may be used to offset some of the downside risk associated with a long position in an underlying asset. Hedging strategies may not fully eliminate risk and can result in losses.

3. Access to multiple markets

CFDs can provide access to a range of markets, including forex, indices, commodities, shares, and cryptocurrencies, through a single trading account. This may allow traders to manage exposure across different asset classes without directly owning the underlying assets.

The way CFDs are used will depend on a trader's objectives, experience, risk tolerance, and the regulatory requirements that apply to their account.