On one hand, investing is trading for the long-term, which is based on lower-risk investments. Whereas trading is centred on short-term speculation of stocks, which is based on higher-risk investments. Individual share traders tend to fall into one of two broad categories:
- Investors, who focus on long-term value by building a portfolio to deliver returns over several months or years. Investing poses less risk, as the likelihood of generating a positive return on capital is higher. However, you may get back less than what you originally put in.
- Traders, who try to capitalise on short-term movements, often by making many trades in a single day. Speculation poses greater risk, as the direction of the trade can go one way or another.
If you’re a speculative trader, you can use your share holdings as collateral to cover your CFD trades*. CFDs are a leveraged product, which means you only have to put down a small deposit for a much larger market exposure. Leverage comes with significant benefits and risks, which means your investment capital can go further, but you can also lose more than your initial deposit. You can reduce your risk by using our risk management tools, such as opening a limit risk account or attaching a guaranteed stop on your trades.
*When using IG’s collateral service your share portfolio is at risk. We reserve the right to liquidate any stock held on your share trading account to offset any debit balance incurred on any of your other IG accounts.