How CFD trading works in Singapore—and what to know before you start

You’ve probably heard the buzz—CFDs, leverage, going short. Maybe your friend at a kopitiam casually mentioned a “margin call” while sipping kopi-o, and you nodded along, not quite sure what any of it meant. At the same time, some of your ang bao money is still sitting untouched in your bank account. The interest rate is barely keeping up with inflation, and there’s that lingering feeling: is there something smarter you could be doing with it?

If this sounds familiar, you’re not alone. Many young Singaporeans want to do more with their money but are turned off by jargon or worried about getting burned. This article is for you: the millennial or Gen Z investor trying to understand what CFD trading really is—and what it’s not. CFD stands for “Contract for Difference.” That might sound like something from a law textbook, but in practice, it’s more straightforward than it appears.

When you trade a CFD, you’re speculating on whether the price of an asset—say, Tesla shares or gold—will go up or down. You never actually own the asset. Instead, you enter into a contract with your broker (like IG, a MAS-regulated firm) to pay or receive the difference in price between when you open and close the trade.

Think of it like this: you’re watching concert ticket prices on Carousell, trying to predict whether they’ll rise or fall. You don’t buy any tickets—you just profit (or lose) based on whether your prediction is right. In CFD trading, that’s exactly what you’re doing with financial markets. No ownership, just exposure to the price movement.

And unlike regular investing, where you only make money if the price rises (called “going long”), CFDs let you bet that prices will fall (called “going short”). That flexibility is part of the appeal—but it comes with more complexity.

In Singapore, traditional investing usually means opening a brokerage account, buying shares, and holding them in your CDP. You own the asset, receive dividends, and benefit if the price goes up.

CFD trading, in contrast, is often used for short-term trades. You're not buying for the long haul; you're trying to capture price movements over hours, days, or weeks. Here’s the core difference:

• Traditional investing is about ownership. You make money if prices go up.
• CFD trading is about direction. You can make money whether prices go up or down—as long as you’re right.

This directional flexibility attracts traders looking to profit in both rising and falling markets. But it also means you’re not building long-term wealth the way you would with an ETF or dividend stock. That’s a key distinction—and one the Monetary Authority of Singapore (MAS) wants investors to understand clearly.

CFDs are almost always traded with leverage. That means you can open a position with only a fraction of its full value—essentially borrowing from your broker. Let’s say you want to trade a stock priced at S$10. With no leverage, you’d need S$1,000 to buy 100 shares. But with 20x leverage, you only need S$50. The rest is funded by your broker.

That sounds great—until it doesn’t. Because if the stock price moves against you, your losses are also magnified.

• If the price rises by 5%, your S$50 could turn into a S$100 gain.
• If it falls by 5%, you could lose your entire deposit—and possibly more.

Leverage can supercharge gains. But it also exposes you to fast, steep losses. That’s why MAS imposes strict rules on leverage caps for retail investors—usually no more than 20:1 for major forex pairs, and lower for other asset classes.

The other reason CFDs are popular among traders is access. With a single CFD account, you can trade thousands of global markets, including:

• Singapore stocks (e.g., DBS, Singtel)
• US tech giants (e.g., Tesla, Nvidia)
• Indices (e.g., S&P 500, Hang Seng, Straits Times Index)
• Commodities (e.g., gold, oil)
• Currencies (e.g., USD/SGD, USD/JPY)

For young investors used to app-based convenience and global exposure, this breadth is attractive. But wider access means greater responsibility. You’re not just investing in things you know—you’re betting on markets you may have never studied.

Because of their complexity and leverage, CFDs are classified by MAS as Specified Investment Products (SIPs). That means brokers must assess your knowledge and experience before letting you trade them. You’ll typically need to pass a Customer Knowledge Assessment (CKA) unless you meet certain criteria (e.g., financial work experience or relevant qualifications).

Here’s what MAS requires of CFD brokers like IG:

• Segregated client funds: Your trading capital is held separately from the broker’s own money.
• Risk disclosures: Before trading, you must acknowledge the risks of leverage and margin calls.
• Product suitability checks: Platforms are required to assess if CFDs are appropriate for your profile.
• Leverage limits: Retail traders are capped at lower leverage compared to professionals.
• Negative balance protection: You can’t lose more than the funds in your account.

These rules aim to protect retail investors—especially first-timers—from catastrophic losses. But they don’t eliminate risk entirely. Even with safeguards, markets move fast, and leverage makes every movement count.

Modern platforms like IG offer several risk control tools:

• Stop-loss orders: Automatically close your position if losses exceed a certain amount.
• Guaranteed stop-loss orders (GSLOs): For a fee, your trade will close at the exact price you set, even during volatile moves.
• Margin alerts and auto-closeouts: You’ll be warned or closed out before your account balance turns negative.

These are useful, but not perfect. For example, a stop-loss can slip during high volatility—meaning you lose more than intended. Only a GSLO can prevent that, and it comes with extra cost. It’s also worth noting that CFDs require daily monitoring. Unlike a long-term ETF that sits quietly in your portfolio, CFD positions change value constantly and require active oversight.

Do you need a lot of money to start? Not necessarily. CFDs let you start with a small amount of capital due to leverage. For instance, IG allows trades with no minimum funding, and you can access global stocks with just a few hundred dollars.

But here’s the catch: small capital doesn't mean small risk. A S$100 position on 20x leverage means you’re controlling S$2,000 worth of exposure. If the market moves 5% against you, that’s S$100 gone—your entire deposit. So even if the bar to entry seems low, the exposure you're taking on is high. This is why MAS classifies CFDs as unsuitable for long-term investors or those with low risk tolerance.

IG is one of the most established CFD brokers, with over 50 years in the business. It’s regulated by MAS, which means client money protections, regular audits, and clear compliance standards.

Here’s what makes it stand out:

• Access to over 13,000 global markets
• User-friendly desktop and mobile platforms
• Regulatory oversight from MAS
• Risk management tools (stop-loss, GSLO, alerts)
• No minimum funding requirement

There are also promotional perks through partners like MoneySmart—for example, cash bonuses and entry into prize draws when you open an account and make your first trade. But remember, promotions are not a reason to start trading. They’re incentives, not guarantees of success.

For most Singaporeans, investing usually begins with:

• Singapore Savings Bonds (SSBs)
• REITs or ETFs
• Blue-chip stocks
• Unit trusts or robo-advisors

These instruments are structured for long-term financial goals—retirement, home purchase, children’s education. They typically offer slower, steadier growth with limited downside risk. CFD trading, by contrast, is high-risk, short-term speculation. It’s not about building wealth—it’s about capturing market moves. If that aligns with your risk appetite, it can be part of a diversified strategy—but never the core.

Before entering your first CFD trade, ask yourself:

• Can I afford to lose this money without affecting my core savings?
• Do I understand how leverage works in practice—not just in theory?
• Do I have time to monitor trades daily?
• Do I have a trading plan—or just FOMO from friends?

If the answer to any of these is no, take a step back. Learn more, test with demo accounts, or speak to a financial advisor. The CFD market will still be there when you’re ready.

CFD trading offers access, flexibility, and excitement. But those same qualities make it risky—especially for newer investors without a clear plan. That’s why MAS regulates the product closely, requiring knowledge assessments, leverage caps, and strong risk disclosures.

For young Singaporeans looking to understand how markets move, CFDs can be a useful learning tool. But for those looking to build long-term wealth, they’re not a substitute for a diversified, time-tested portfolio. The product is legal. The platform is regulated. But the risk? That’s still yours to manage. As always, the instrument is optional—but its consequences aren’t.