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Personally I see CFDs as a balance between spot and futures market. Future market are a bit expensive for a beginner because of lot size. Spot may not be right because of the settlement period, govt fees as well as lack of of short selling. So while CFD have higher spread, it strike as a perfect balance to me for a beginner.

But I keep hearing that CFDs are more dangerous than gambling. Personally I think trading in CFDs is same like trading future. Same skills are required and both have similar risks. I know unskilled beginners would prefer future over CFDs and lose money, but that means people should educate themselves before trading. It doesn't mean CFDs are inherently bad.

Are there any specific reasons why CFDs are more dangerous than gambling or future market? What are the risks CFD have that future market lacks?

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  • Where did you see this described as “more dangerous than gambling”? That seems like a silly comparison to me, since the term “gambling” covers a wide variety of activities.
    – Ben Miller
    May 25, 2020 at 3:29
  • @BenMiller-RememberMonica Just comment on website like this.
    – PhilipFisher
    May 25, 2020 at 10:12
  • It sounds like you've equated "gambling with "futures" when they are different. Gambling is much more broad, and some forms of gambling have loss limits. Futures might also be considered gambling with no loss limits (like CFD). Maybe replace "gambling" with "futures" and/or point to specific quotes that you mention?
    – D Stanley
    May 26, 2020 at 17:47

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When gambling you can only lose as much money as you have. There are several things you can do with the stock market where your potential losses exceed several times your investment. This is one of them.

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  • Futures might also be considered "gambling", and you can lose more than you put in, so this is not true for all forms of "gambling".
    – D Stanley
    May 26, 2020 at 17:48
  • Ever heard of "gambling debts"? There are definitely gamblers who lose more than they put in, due to credit extended by bookies.
    – nanoman
    May 26, 2020 at 18:39
  • Yes exactly. Futures have the same risk, but people don't usually call them gambling.
    – PhilipFisher
    Jun 9, 2020 at 8:23
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Gambling is the wagering of money on an uncertain outcome. In the financial markets that encompasses a wide variety of strategies and varying degrees of risk. An ultra conservative person might define buying stock as a gamble. A risk tolerant person would not.

Anything involving leverage has a higher degree of risk (many option strategies, futures, CFDs, trading on margin) and would be considered a larger gamble.

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  • So it's just a perception of people and how you do it.
    – PhilipFisher
    Jun 9, 2020 at 8:24

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