Is it possible to trade CFD without leverage?
Generally not, however some brokers may allow it. My previous CFD Broker - CMC Markets, used to allow you to adjust the leverage from the maximum allowed for that stock (say 5%) to 100% of your own money before you place a trade. So obviously if you set it at 100% you pay no interest on holding open long positions overnight. If you can't find a broker that allows this (as I don't think there would be too many around), you can always trade within your account size. For example, if you have an account size of $20,000 then you only take out trades that have a face value up to the $20,000. When you become more experienced and confident you can increase this to 2 or 3 time your account size. Maybe, if you are just starting out, you should first open a virtual account to test your strategies out and get used to using leverage. You should put together a trading plan with position sizing and risk management before starting real trading, and you can test these in your virtual trading before putting real money on the table. Also, if you want to avoid leverage when first starting out, you could always start trading the underlying without any leverage, but you should still have a trading plan in place first. If you don't need leverage, then it's a better idea to just buy the underlying sock itself. This will net you the following benefits: Leverage is for speculating. If you don' want to be leveraged, then invest long term. Yes, just set aside the amount of money. If you buy a cfd long in a stock for a 1000$, set aside 1000$. If you buy a cfd short, set aside the same amount and include a stoploss at the value at which the money is depleted. In this case however, you can stil lose more, because of opening gaps. By doing this, you replicate the stock return, apart from the charged interest rate. You can but there is no point trading CFD's seeing you may still lose more than your investment due to slippage
"I know some derivative markets work like this, so maybe similar with futures.  A futures contract commits two parties to a buy/sell of the underlying securities, but with a futures contract you also create leverage because generally the margin you post on your futures contract is not sufficient to pay for the collateral in the underlying contract. The person buying the future is essentially ""borrowing"" money while the person selling the future is essentially ""lending"" money. The future you enter into is generally a short term contract, so a perfectly hedged lender of funds should expect to receive something that approaches the fed funds rate in the US. Today that would be essentially nothing." leveraged etf's are killer to hold because they seek to return some multiple of the DAILY price movement in an index. so twm seeks to return 2x the daily move in the russell 2000 Let's trace this out assuming (just to make it easy) large daily moves, and that you start with $1000 and the russell 2000 starts at 100. start of first day rusell 2000 == 100 you have $1000 end of first day (up 10% nice!) rusell 2000 == 110 you have $1200 end of second day (~9.1% down) russell 20000 == 100 you have $981.60 so the russell 2000 can move nowhere and you have lost money! This doesn't apply to all etf's just leveraged etf's.  You would be better buying more of a straight inverse etf (RWM) and holding that for a longer time if you wanted to hedge. "I think to some extent you may be confusing the terms margin and leverage. From Investopedia Two concepts that are important to traders are margin and leverage. Margin is a loan extended by your broker that allows you to leverage the funds and securities in your account to enter larger trades. In order to use margin, you must open and be approved for a margin account. The loan is collateralized by the securities and cash in your margin account. The borrowed money doesn't come free, however; it has to be paid back with interest. If you are a day trader or scalper this may not be a concern; but if you are a swing trader, you can expect to pay between 5 and 10% interest on the borrowed money, or margin. Going hand-in-hand with margin is leverage; you use margin to create leverage. Leverage is the increased buying power that is available to margin account holders.  Essentially, leverage allows you to pay less than full price for a trade, giving you the ability to enter larger positions than would be possible with your account funds alone. Leverage is expressed as a ratio. A 2:1 leverage, for example, means that you would be able to hold a position that is twice the value of your trading account. If you had $25,000 in your trading account with 2:1 leverage, you would be able to purchase $50,000 worth of stock. Margin refers to essentially buying with borrowed money.  This must be paid back, with interest.  You also may have a ""margin call"" forcing you to liquidate assets if you go beyond your margin limits. Leverage can be achieved in a number of ways when investing, one of which is investing with a margin account." "This probably won't be a popular answer due to the many number of disadvantaged market participants out there but: Yes, it is possible to distort the markets for securities this way. But it is more useful to understand how this works for any market (since it is illegal in securities markets where company shares are involves).  Since you asked about the company Apple, you should be aware this is a form of market manipulation and is illegal... when dealing with securities. In any supply and demand market this is possible especially during periods when other market participants are not prevalent. Now the way to do this usually involves having multiple accounts you control, where you are acting as multiple market participants with different brokers etc. The most crafty ways to do with involve shell companies w/ brokerage accounts but this is usually to mask illegal behavior In the securities markets where there are consequences for manipulating the shares of securities. In other markets this is not necessary because there is no authority prohibiting this kind of trading behavior. Account B buys from Account A, account A buys from Account B, etc. The biggest issue is getting all of the accounts capitalized initially. The third issue is then actually being able to make a profit from doing this at all. Because eventually one of your accounts will have all of the shares or whatever, and there would still be no way to sell them because there are no other market participants to sell to, since you were the only one moving the price. Therefore this kind of market manipulation is coupled with ""promotions"" to attract liquidity to a financial product. (NOTE the mere fact of a promotion does not mean that illegal trading behavior is occurring, but it does usually mean that someone else is selling into the liquidity) Another way to make this kind of trading behavior profitable is via the derivatives market. Options contracts are priced solely by the trading price of the underlying asset, so even if your multiple account trading could only at best break even when you sell your final holdings (basically resetting the price to where it was because you started distorting it), this is fine because your real trade is in the options market. Lets say Apple was trading at $200 , the options contract at the $200 strike is a call trading at $1 with no intrinsic value. You can buy to open several thousand of the $200 strike without distorting the shares market at all,  then in the shares market you bid up Apple to $210, now your options contract is trading at $11 with $10 of intrinsic value, so you just made 1000% gain and are able to sell to close those call options. Then you unwind the rest of your trade and sell your $210 apple shares, probably for $200 or $198 or less (because there are few market participants that actually valued the shares for that high, the real bidders are at $200 and lower). This is hardly a discreet thing to do, so like I mentioned before, this is illegal in markets where actual company shares are involved and should not be attempted in stock markets but other markets won't have the same prohibitions, this is a general inefficiency in capital markets in general and certain derivatives pricing formulas. It is important to understand these things if you plan to participate in markets that claim to be fair. There is nothing novel about this sort of thing, and it is just a problem of allocating enough capital to do so." "I'm not familiar with the Dupire model; I'll have to take a look at (it sounds cool though).  I think that all arbitrage-free models are ""incomplete"" in the sense that they don't say, ""This is a price that doesn't imply any arbitrage opportunities *anywhere*,"" but instead say, ""This is a price that doesn't imply any arbitrage opportunities within a specific set of securities.""  What set you're using will vary from one model to another, and I'd say (although other people might reasonably disagree) that taking a volatility structure as given is as much no-arbitrage as taking a term structure as given.  As a side note, I'd say that what (theoretically) distinguishes an equilibrium model is that you're supposed to *know* the parameters, not guess at them or observe them from the real world.  By that definition, a really complete CAPM or Black-Scholes would explain how to derive the correct beta or volatility from fundamental analysis.  Also, I've upvoted you elsewhere for some really good comments you made about intrinsic value." IB's overnight financing cost for US CFDs below $100,000 is the Benchmark Rate + 1.5% for long positions and the Benchmark Rate -1.5% for short positions. You can check the IB CFD Contract Interest for their full list of financing costs for share CFDs. IB's commissions  for an executed trade (where your monthly volume is below $300,000) is $0.005 per share with a minimum per order of $1.00. Commissions and overnight financing are 2 different fees, the overnight financing is charged because CFDs are leveraged. An order is just that, it is not a trade. It means your order has not been executed yet and is still an active order which you have not paid any commissions for yet. Regarding the orders that persist overnight, an example might be, you place an order to buy to open 200 CFDs. If only 100 CFDs are traded on that day, and the remaining 100 CFDs of your order remains active overnight, it will be considered a new order for the purposes of determining commission minimums. Highest possible is meaningless.  Ex: Use 17x Leverage on E-mini S&P 500 Futures, perfectly long before an uptick and short before a downtick every minute. Goes to the moon in a day of 1,440 minutes.  You are supposed to use a Buy-and-Hold SPY, with leverage that makes the Standard Deviation of SPY same as your Portfolio/Algorithm, as benchmark. "There are some useful answers here, but I don't think any of them are quite sufficient.  Yes, there are some risks involved in CFD trading, but I will try and give you information so you can make your own decision. Firstly, Cyprus is part of the EU, which gives it a level of credibility.  I'm not saying it's the safest or most well regulated market in the world, but that in itself would not particularly scare me away.  The far more important issue here is the risk of using CFDs and of eToro themselves. A Contract for Difference is really just a specialization of an Equity Swap.  It is in no way like owning a real stock.  When you purchase shares of a company you own a real Asset and are usually entitled to dividends and voting rights.  With a CFD, what you own is one side of a Swap contract.  You have a legal agreement between yourself and eToro to ""swap"" the return earned on the underlying stock for whatever fees eToro decide to charge.  As already mentioned, CFDs are not available to US citizens. Equity swaps have many benefits in financial markets.  They can allow access to restricted markets by entering into swaps with banks that have the necessary licenses to trade in places like China.  Many ""synthetic"" ETFs use them in Europe as a way to minimize tracking error as the return is guaranteed by the swap counterparty (for a charge). They also come with one signficant risk: counterparty credit risk.  When trading with eToro, for as long as your position is open, you are at risk of eToro going bankrupt.  If eToro failed, you do not actually own any stocks, you only own swap contracts which are going to be worthless if eToro ceased to exist. CFDs also have an ongoing cost to maintain the open position.  This makes them less suitable for buy and hold strategies as those ongoing costs will eat into your returns.  It's also not clear whether you would receive any dividends paid by the stock, which make up a significant proportion of returns for buy and hold investors.  eToro's website is fairly non-committal: eToro intends to offer a financial compensation representing the dividends which will be allocated on stocks, to the extent such dividends shall be available to eToro. All of these points expose what CFDs are really for - speculating on the stock market, or as I like to call it: gambling.  If you want to invest in stocks for the long term, CFDs are a bad idea - they have high ongoing costs and the counterparty risk becomes significant.  Wait until you have enough money and then buy the real thing.  Alternatively, consider mutual funds which will allow you to purchase partial shares and will ensure your investment is better diversified across a large number of stocks.  If however, you want to gamble and only keep your position open for a short time, these issues may not be of concern to you. There's nothing wrong with gambling, it can be fun, many people gamble in casinos or on football matches - but bear in mind that's what CFDs are for.  CFDs were in fact originally created for the UK market as a way to avoid paying capital gains tax when making short term speculative trades.  However, if you are going to gamble, make sure you're not putting any more than 1% of your net worth at risk (0.1% may be a better target). There are a few other ways to take a position on stocks using less money than the share price: Fortunately, eToro do not allow leveraged purchase of stocks so you're reasonably safe on this point.  They claim this is because of their 'responsible trading policy', although I find that somewhat questionable coming from a broker that offers 400:1 leverage on FX pairs. One final word on eToro's ""social trading"" feature.  A few years ago I was in a casino playing Blackjack.  I know nothing about Blackjack, but through sheer luck of the draw I managed to treble my money in a very small amount of time.  Seeing this, a person behind me started ""following"" me by putting his chips down on my seat.  Needless to say, I lost everything, but amazingly the person behind me got quite annoyed and started criticizing my strategy.  The idea of following other people's trades just because they've been lucky in the past sounds entirely foolish to me.  Remember the warning on every mutual fund: Past performance does not guarantee future returns" "Okay, yes! That would seem to make sense. So something like a Dupire local vol model.   In the context of term structure modelling, you can also incorporate a volatility surface into the pricing of European and even exotic options (e.g. through a SABR or an LMM-SABR for exotics), which I suppose means by your criteria there are actually varying degree of ""arbitrage free-ness"" when it comes to picking a model. By that I mean there are varying degrees of what your model takes as ""given"". If it takes the market price of risk as given, it's an equilibrium model. If it takes the observed term structure as given, it's an arbitrage free model. If it takes the volatility structure as given, it's something else.  Nawalkha, Beliaeva and Soto wrote a paper called ""A New Taxonomy of the Dynamic Term Structure Models"" in the Journal of Investment Management that basically coincides with what we're saying.  So yes, it sounds right to me." "How are derivatives like covered warrants or CFDs different from the bucket shops that were made illegal in the US? After reading up a little on the topic, the core difference seems to be that bucket shops were basically running betting pools, with everyone betting against the operator, whereas CFDs and similar derivatives are traded between speculators and the operator merely provides a market and checks the liquidity of participants. A CW seems to be a different matter that I'm not fully sure I understand (at least the description of Wikipedia seems to contradict your statement about not trade being performed on the underlying security). Should I worry that some regulator decides that my ""market maker"" is an illegal gambling operation? Not really. Nations with a mature financial industry (like Japan) invariably have heavy regulations that mandate constant auditing of institutions that sell financial instruments. In Japan, the Financial Services Agency is in charge of this. It's almost impossible that they would let an institution operate and later decide that its basic business model is illegal. What is possible are mainly two scenarios:" A CFD broker will let you open a trade on margin as long as your account balance is more than the margin required on all your open trades. If the required margin increases within a certain percentage of your account balance, you will get a margin call. If you then don't deposit more funds or close losing trades out, the broker will close all your trades. Note: Your account balance is the remaining funds you have left to open new trades with. I always use stop loss orders with all my open trades, and because of this my broker reduces the amount of margin required on each trade. This allows me to have more open trades at the one time without increasing my funds. Effects of a Losing Trade on Margin Say I have an account balance of $2,000 and open a long trade in a share CFD of 1,000 CFDs with a share price of $10 and margin of 10%. The face value of the shares would be $10,000, but my initial margin would be $1,000 (10% of $10,000).  If I don't place a stop loss and the price falls to $9, I would have lost $1,000 and my remaining margin would now be $900 (10% of $9,000). So I would have $100 balance remaining in my account. I would probably receive a margin call to deposit more funds in or close out my trade. If I don't respond the broker will close out my position before my balance gets to $0. If instead I placed a stop loss at say $9.50, my initial margin might be reduced to $500. As the price drops to $9.60 I would have lost $400 and my remaining margin would now only be $100, with my account balance at $1,500. When the price drops to $9.50 I will get stopped out, my trade will be closed and I would have lost $500, with my account balance still at $1,500. Effects of a Winning Trade on Margin Say I have the same account balance as before and open the same trade but this time the price moves up. If I don't place a stop loss and the price goes up to $11, I would have made a $1,000 profit and my remaining margin will now be $1,100 (10% of $11,000). So my account balance would now be $2,000 + $1,000 - $1,100 = $1,900. If I had placed a stop loss at say $9.50 again and the price moves up to $10.50, I would have made a profit of $500 and my margin would now be $1,000. My account balance would be $2,000 + $500 - $1,000 = $1,500. However, if after the price went up to $10.50 I also moved my stop loss up to $10, then I would have $500 profit and only $500 margin. So my balance in this case would be $2,000 + $500 - $500 = $2,000. So by using stop losses as part of your risk management you can reduce the margin used from your balance which will allow you to open more trades without any extra funds deposited into your account. Yes, if there is liquidity you can sell your option to someone else as a profit. This is what the majority of option trading volume is used for: speculative trading with leverage. "I think you should start here https://www.tastytrade.com/tt/ and learn about equity options. Its a lot more accessible for you to get hands on experience. Start with learning about put/call spreads and maybe put on some SPY trades. Options are essentially the same in every market; I would start here.    I think this idea you have of not having to use ""margin"" is coming from people running spread strategies that have limited downside/upside" Concerning the Broker: eToro is authorized and registered in Cyprus by the Cyprus Securities Exchange Commission (CySEC). Although they are regulated by Cyprus law, many malicious online brokers have opened shop there because they seem to get along with the law while they rip off customers. Maybe this has changed in the last two years, personally i did not follow the developments. eToro USA is regulated by the Commodity Futures Trading Commission (CFTC) and thus doing business in a good regulated environment. Of course the CFTC cannot see into the future, so some black sheep are getting fined and even their license revoked every now and then. It has no NFA Actions: http://www.nfa.futures.org/basicnet/Details.aspx?entityid=45NH%2b2Upfr0%3d Concerning the trade instrument: Please read the article that DumbCoder posted carefully and in full because it contains information you absolutely have to have if you are to do anything with Contract for difference (CFD). Basically, a CFD is an over the counter product (OTC) which means it is traded between two parties directly and not going through an exchange. Yes, there is additional risk compared to the stock itself, mainly: To trade a CFD, you sign a contract with your broker, which in almost all cases allows the broker A CFD is just a derivative financial instrument which allows speculating / investing in an asset without trading the actual asset itself. CFDs do not have to mirror the underlying asset's price and price movement and can basically have any price because the broker quotes you independently of the underlying. If you do not know how all this works and what the instrument / vehicle actually is and how it works; and do not know what to look for in a broker, please do not trade it. Do yourself a favor and get educated, inform yourself, because otherwise your money will be gone fast. Marketing campaigns such as this are targeted at people who do not have the knowledge required and thus lose a significant portion (most of the time all) of their deposits. Answer to the actual question: No, there is no better way. You can by the stock itself, or a derivative based on it. This means CFDs, options or futures. All of them require additional knowledge because they work differently than the stock. TL;DR: DumbCoder is absolutely right, do not do it if you do not know what it is about. EDIT: Revisiting this answer and reading the other answers, i realize this sounds like derivatives are bad in general. This is absolutely not the case, and i did not intend it to sound this way. I merely wanted to emphasize the point that without sufficient knowledge, trading such products is a great risk and in most cases, should be avoided. In general you will take home more in the US than in Canada. There are so many variables that is is impossible to provide a comprehensive answer that will cover all bases: so here are a few hand-waving statements. Two example calculator web sites for Canada and the US (chosen somewhat at random through Google, show that making $50,000 of either currency for the upcoming tax year in Canada you would expect to pay about $9,100 and for the US $5,900.  Missing there are the state taxes, however, which also vary wildly. The deductions, adjustment and credits in both countries can really add up, so if you have specific questions, you should consult a tax specialist. Similarly, both countries provide various tax sheltered investment structures that change the game somewhat over the long term.