You can also use a CFD to get exposure to a much larger position than with a standard trade. Using leverage, you can agree to exchange the difference in price of a larger amount of an asset without having to commit to the full cost of the position at the outset.
Say you wanted to open a position equivalent to 500 Apple shares. With a standard trade, that would mean paying the full cost of the shares. With a CFD, you might have to only put up 5% of the cost.
You’ll still exchange the difference in price of 500 Apple shares from when your position is opened to when it is closed, so your profit and loss will still be calculated on the full size of your position. That means that profits can be hugely multiplied: but that your losses can as well, even above your original deposit.