CFDs enable investors to leverage an investment up to many times under normal conditions. This strategy is popular with aggressive, risk-taking investors, because the ability to leverage the investment increases the profit potential of their investment, but it also magnifies the possibility of loss.

Commissions charged for CFDs trading are usually less than that for physical stock. For some CFDs, there is no commission. This reduces the cost of trading.

The CFDs market is electronic, requiring no paper administration such as stock certificates, transfer forms or custodian fees. Unlike many international stock markets that still require a paper trail for the investor to account for any holding of stock, trading CFDs is efficient and rapid. Electronic trading is faster, cheaper and more accurate and allows clients to trade from anywhere.

CFDs have the advantage of enabling investors to short sell a contract. With traditional stocks, investors who want to short sell need to borrow stock which can be an expensive and complicated process. However with CFDs, they can just click the sell button and buy the CFDs back at a suitable time in the future. In some cases, short selling also enables the investor to receive an interest accrual based on the current interest rate of the currency in which the index is traded.

Serious investors look to CFDs for the rapid trading capability they offer - instantly tradable prices for almost all CFDs. Using Forexstar, investors can hit the price immediately when it reaches the level they seek, and receive an instant confirmation of the trade at that level.

CFDs are often used to hedge an existing portfolio. Rather than liquidate or sell one's physical stock portfolio during a period of falling prices or volatile markets, investors can quickly hedge potential risks by selling the equivalent position using CFDs for a short or long period and the effect of leveraging means that a hedge can be achieved while committing less funds than would otherwise be necessary. Investors can thus secure effective protection for their stock investments at very little cost.