Trading CFDs offers benefits like the ability to profit from both rising and falling markets by going long or short on an asset. It also provides access to a wide range of global markets without needing to own the underlying asset, and traders can use leverage to amplify their exposure with a smaller initial investment. Additionally, CFDs often have lower transaction costs compared to traditional trading, making them attractive for active traders.

Leverage in CFD trading allows traders to control a larger position in the market with a smaller amount of capital, borrowing the difference from the broker. For example, with a 10:1 leverage ratio, a trader can control $10,000 worth of assets with just $1,000, potentially increasing profits but also magnifying losses. This makes leverage a double-edged sword, requiring careful risk management to avoid significant financial setbacks.

CFD trading typically involves fees like the spread, which is the difference between the buy and sell price of the asset, charged by the broker for each trade. Additionally, traders may face overnight financing fees (also called swap fees) if they hold positions open past a certain time, as well as potential commissions on certain platforms. It’s important to understand these costs, as they can impact overall profitability, especially for frequent traders.