Basically, a CFD (Contract for Difference) account gives a trader the ability to speculate on various financial markets such as indices, stocks, forex, commodities, and cryptocurrencies without owning the asset. However, with an invest account, you are trading a real asset. Below, we’ll explain these two trading options as well as their key differences.
Trading 212 CFD vs Invest - Which Accout Type is Better
Trading 212 offers CFD and invest account options. However, there are key differences between the two account types. In this Trading 212 CFD vs Invest comparison article we'll see which account type is better suited to your needs.
Trading 212 CFD
Trading 212 offers a CFD trading option that allows you to speculate on many financial markets without owning the asset. Though it provides access to forex, cryptocurrencies, stocks, and other markets, it is a high-risk account. A CFD allows traders to profit from the price movement of an asset.
It is important to note that, with CFD trading, you will not own the underlying asset. Rather, the trader can speculate on the price and acquire revenue based on the price movement of that particular asset. For instance, you can speculate whether the price of TESLA will go up or down without buying an actual Tesla share.
A CFD has two trades. The first trade is the open position, which can be late closed by a reverse trade at a different price. With CFD trading, the investor can choose to go Long and Buy, if they speculate that the price of the asset will increase or go Short and Sell if they speculate that the market price will come down.
If the investor believes the price of the asset will rise, the first trade will be a long or buy position. The second trade is a sell which closes the open position.
On the other hand, if an investor believes the value of the asset will reduce, the first trade will be a sell or short position.
CFD also allows for leverage. For Trading 212, the maximum leverage usually is 1:30. However, this can increase up to 1:500 for investors who qualify as professional clients.
Leveraging allows the trader to spread their capital further. It allows for trading larger amounts of units than the capital you initially deposited.
When trading CFDs, there are certain associated fees such as spread, overnight funding, currency conversion fees, and other commissions.
CFDs offer certain benefits to traders. It has advantages such as higher leverage, no shorting rules, no day trading requirements, and access to a range of financial instruments.
Trading 212 Invest
With an invest account on Trading 212, the investor is trading the real asset they own. Unlike CFD, the Invest account does not allow leverage.
The invest account only allows for buying or selling equities with an exact monetary value of the equity. An Invest account is more suitable for long-term investing.
Also, the risk is equal to the total value of the asset the trader buys. While CFDs allow traders to benefit from the price movements in the market, an Invest account allows the trader to profit if the price of the asset goes above the price of the trader’s opening position.
Trading 212 CFD vs Invest
Trading 212’s CFD account includes over 3.500 assets in total, distributed over various markets. The invest account offers over 3.000 stocks, 400+ ETFs, and other real assets for trading. There are some key differences between CFD and Invest accounts. Knowing these differences will help you make the right choice.
First, CFDs allows you to predict price movements and make profit from them without owning the underlying asset. It is more suitable for short-term trading, especially in volatile markets.
However, it is riskier than traditional trading. Also, a Trading 212 CFD account will allow you to use leverage while this is not possible with an Invest account.
Trading 212 offers the CFD and Invest trading accounts. While the CFD allows for more access to various financial markets, it is more suited to short-term investing. Also, it carries more risk than traditional trading.
With CFDs, you can speculate on various markets without owning the asset while Invest involves trading with assets owned by the investor.
To get familiar with both options, Trading 212 offers a demo account for both CFD and Invest accounts. The demo account allows you gain trading experience in a risk-free way.
The Trading 212 CFD account is better suited for traders who want to trade CFDs with leverage. The Trading 212 Invest account is more suited for long-term investors.