ETFs

One of the advantages of CFD trading is that you only need to deposit a percentage of the full value of your position to open a trade, known as trading on leverage. Remember, trading ETFs on leverage can also amplify losses, so it's important to manage your risk.

As an example, let's say you want to put down a total of $1,000 on your ETF trade. Due to the leverage available with CFD trading (5:1 in this case), you would be able to enter this position with an initial outlay of $200, instead of $1,000. However, remember that your profits and losses are based on the full value of the trade ($1,000).

When you trade an ETF CFD, you agree to exchange the difference in the ETF's price between opening and closing your position. You can go long or short, you trade on margin, and you don’t own the underlying fund. Because the trade is leveraged, both profits and losses are based on the full position value.

There are a number of costs to consider when trading on ETFs, including spread costs, holding costs (for trades held overnight) and guaranteed stop-loss order charges (if you use this risk-management tool). View our trading costs for more details.

ETF trading offers better value when compared with trading each individual constituent of an ETF. There’s no cost to opening an account with us, and no minimum deposit.

All trading and investing carries a certain amount of risk, including ETF trading. However, when compared to trading on individual shares, an ETF comprises a wide range of related instruments. This diversification can help to reduce risk, because ETFs aren’t reliant on the performance of a single instrument.

Trading on shares focuses on trading a single company. ETFs instead provide exposure to a tracked market index, in a similar way to the S&P 500 or FTSE 100. ETFs also track a selection of assets that can include stocks, bonds and commodities, for example. Although an ETF is essentially a wrapper tracking several assets, they are still traded like a share.