Trade CFDs on spot indices with low margin
Extended trading hours and the possibility of trading both long and short positions, attracts active traders, seeking high returns and portfolio diversification. We are providing our clients with competitive trading conditions for entering and trading in one of the broadest markets in the world.
Trading Stocks vs. Trading Stocks CFDs
With CFDs, you trade with leverage. This means you can gain greater exposure to the underlying asset with less capital. Your total exposure compared to your margin is referred to as the leverage ratio. However, whereas your initial investment is lower, your total profits and losses are calculated at full position value. Therefore, leverage also implies greater risks and losses.
*CFD traders do not own the underlying asset over which the CFD is based, as opposed to buying shares. When holding shares, you generally have additional rights, such as voting rights and dividends.
*CFDs provide you with the opportunity to profit in both rising and falling markets – you can open a Buy position if you think the price will go up, and a Sell position if you expect the price to decrease.
*When you trade CFDs, you can easily access shares from several markets all over the world, as well as other instruments from the same account. This can make it easier to diversify your portfolio.
*When CFD positions are left open overnight, an overnight fee is charged. This makes CFD trading less suitable for long term positions.
*Opening a CFD trading account is usually faster than opening a traditional brokerage account.
*CFD trading is generally used for shorter-term trading during events such as earnings announcements. Share trading is most often used for building portfolios.
*Since CFDs reflect the underlying market, shares in the stock market and CFDs are traded much in the same way. The price a CFD provider would be willing to buy or sell a CFD at is derived from the price the stock is traded on the relevant exchange and in terms of notional value, one share is equivalent to one share CFD.
Trading Stocks vs. Trading Stocks CFDs
CFD Trading Example
The price of one Facebook share is $50 and you want to enter into a CFD contract of 15 shares. 15 shares x $50 per share equals $750. With leveraged trading, you do not need to invest the full $750. With a leverage of 1:5, your initial margin requirement for this particular share CFD is 20%. You will have to deposit $150 which is 20% of the notional exposure of $750. You need to make sure to have enough money in your account to open and maintain your position.
If you think Facebook’s price will rise, you open a Buy position, and if you think it will fall, then you open a Sell position. You can choose to set stops to close your position automatically at a predetermined price. When you,
or the stops added by you, close your position, the profit or loss will be added or subtracted from your account balance. If your position remains open after market close, you will be charged an overnight funding fee.
From the same account, you can also choose to trade shares listed in many different markets, such as Nintendo,
BP or Adidas without any extra requirements.
The Bottom Line
CFD trading has both advantages and disadvantages when compared to regular share trading. Both ways of trading provide options to take advantage of price movements in financial markets. You need to understand your trading objectives and the kind of trading that best suits you and decide which way to go. If you’d like some more information about CFD trading, check out this video.
Trading Shares with CFDs
Trading Shares with CFDs There are numerous ways to gain exposure to the share market. These include Cash Equities and Derivatives, including CFDs. Over the past decade, trading Contracts for Difference (CFDs) has become increasingly popular. Trading stock CFDs allows customers to gain exposure to the price movement of different stocks without the ownership of the underlying asset. CFDs are by definition contracts between two parties (i.e. the provider and you) to pay the difference between the entry and exit price. It is classified as a financial derivative instrument as its price is derived from the price of the underlying asset.
CFDs have opened the world of trading to the masses due to its ease of access and lower costs. This has both brought a wave of interest to the stock markets. Thus, giving trading and the stock market a greater focus.
When trading CFDs, it is crucial to use a reputable and regulated provider, such as us. This ensures pricing and transactions transparency, as well as various client money protection measures. In addition, regulated providers should disclose the risks involved and are not allowed to trick traders with get-rich-quick schemes.
Trading Shares with CFDs
Trading Shares with CFDs There are numerous ways to gain exposure to the share market. These include Cash Equities and Derivatives, including CFDs. Over the past decade, trading Contracts for Difference (CFDs) has become increasingly popular. Trading stock CFDs allows customers to gain exposure to the price movement of different stocks without the ownership of the underlying asset. CFDs are by definition contracts between two parties (i.e. the provider and you) to pay the difference between the entry and exit price. It is classified as a financial derivative instrument as its price is derived from the price of the underlying asset.
CFDs have opened the world of trading to the masses due to its ease of access and lower costs. This has both brought a wave of interest to the stock markets. Thus, giving trading and the stock market a greater focus.
When trading CFDs, it is crucial to use a reputable and regulated provider, such as us. This ensures pricing and transactions transparency, as well as various client money protection measures. In addition, regulated providers should disclose the risks involved and are not allowed to trick traders with get-rich-quick schemes.
Trading Shares with CFDs
Trading Shares with CFDs There are numerous ways to gain exposure to the share market. These include Cash Equities and Derivatives, including CFDs. Over the past decade, trading Contracts for Difference (CFDs) has become increasingly popular. Trading stock CFDs allows customers to gain exposure to the price movement of different stocks without the ownership of the underlying asset. CFDs are by definition contracts between two parties (i.e. the provider and you) to pay the difference between the entry and exit price. It is classified as a financial derivative instrument as its price is derived from the price of the underlying asset.
CFDs have opened the world of trading to the masses due to its ease of access and lower costs. This has both brought a wave of interest to the stock markets. Thus, giving trading and the stock market a greater focus.
When trading CFDs, it is crucial to use a reputable and regulated provider, such as us. This ensures pricing and transactions transparency, as well as various client money protection measures. In addition, regulated providers should disclose the risks involved and are not allowed to trick traders with get-rich-quick schemes.
Commodities can be defined as commercial products that appear naturally in the ground or are agriculturally cultivated. Commodities play a key role in determining the prices of other financial markets as commodities are
used as input in the manufacturing process – meaning national economies in general, and publicly-listed companies in particular, are affected by their prices. Changes in the prices of commodities tend to affect the entire supply chain.
A good example of this is when the price of crude oil rises due to geopolitical upheaval in the major oil-producing countries. During the 1970s energy crisis, the price of crude oil rose sharply as a result of the “oil embargo” placed
on the USA by members of the Organization of Arab Petroleum Exporting Countries (OAPEC). The embargo resulted in oil prices rising dramatically, causing severe inflation throughout the global economy.
The History of Commodity Exchanges
The Chicago Board of Trade (CBOT) was founded in 1848 and is the oldest futures and options exchange in the world. The exchange deals mainly with commodities such as corn, ethanol, gold, oats, rice, silver, soybeans and wheat. However, it should be noted that CBOT was merged with the Chicago Mercantile Exchange (CME) in 2007
to form the CME Group.
The Chicago Mercantile Exchange (CME) was initially established in 1898 as a leading agricultural commodities exchange known as the Chicago Butter and Egg Board. The CME is now the largest futures and options exchange
in the world and offers various commodity futures as well as financial derivatives on products including currencies and interest rates.
The New York Board of Trade (NYBOT) was founded in 1870 as the New York Cotton Exchange. Later, in 2004,
it merged with the Coffee, Sugar and Cocoa Exchange (CSCE) to form the NYBOT. Today, the NYBOT deals primarily in futures and options contracts for physical commodities such as cocoa, coffee, cotton, sugar and orange juice.
It also deals in currency trading, interest rates and market indices.
An early version of the New York Mercantile Exchange (NYMEX) was established in 1872 dealing in dairy products.
By 1994, NYMEX merged with the Commodity Exchange (COMEX) to become the largest physical commodity exchange of its time. However, as a result of the global financial crisis in 2008, it merged once again with the CME Group of Chicago. For commodity trading outside of the USA, the main exchanges are the London International Financial Futures and Options Exchange (LIFFE), the London Metal Exchange and the Tokyo Commodity Exchange.
Main Classification of Commodities
Commodities can broadly be classified into two main types, ‘Hard Commodities’ and ‘Soft Commodities’. Hard commodities refer to commodities that require extraction or mining. Examples of these commodities include iron ore, crude oil and precious metals. Soft commodities, on the other hand, are typically agricultural products like coffee, corn, Cotton, wheat and livestock such as lean hogs and live cattle.
Sub Classification of Commodities
Commodities can be further classified into several sub-categories such as agricultural commodities, (wheat, soybeans and sugar). The sub-category “Energies” refers to commodities such as crude oil, heating oil, gasoline
and natural gas. Metal commodities can be grouped into precious metals such as Gold, Silver and Platinum, or base
(non-precious) metals such as copper and aluminum. “Livestock commodities” refers to meat products such as feeder cattle, live cattle and lean hogs.
What are Indices?
Indices are a collection of stocks and instruments used to track the growth or trajectory of an industry or sector. These whole-sector tools allow us to look at how a chunk of the market is performing to better understand investment opportunities along with market fluctuations.
The S&P 500 (USA), DAX 30 (Germany) and FTSE 100 (UK) are a collective of each country’s largest companies based on their market capitalization. As an index tracks a basket of publicly traded stocks, by following the index, traders can understand the broad movements of the market and plan out their investment strategy accordingly.
How are stock market indices calculated?
To better understand how indices are calculated, it is important to understand how they are constructed.
Each exchange requires their listed companies to maintain a high standard of accounting and public reporting. Companies such as Standard & Poors (S&P), Xetra, Financial Times Stock Exchange Group (FTSE), and others review these published reports to audit the health and growth of publicly traded companies.
Once compiled, these companies publish their findings, which global investors have relied on for decades. The S&P 500, Xetra’s DAX 30, and the FTSE 100 have reliably guided investors through both prosperous and challenging times, providing honest insight into some of the world’s largest companies.
Can I profit from index trading?
Indices rise and fall on a daily basis. Calculated by grouping together similar companies, traders’ use these tools
as whole market or sector indicators to better understand market movements.
For example, after an announcement by Netflix, you predict that it will have a positive effect on the tech industry
as a whole. You can open a Buy position on US-Tech 100, hoping to profit on this index’s movement. If the index does indeed rise, you can close your position and profit from the difference between your purchase price and closing price. On the other hand, if the index falls and you close your position, you will incur a loss.
If you predict that there will be a negative effect on the index, you can open a Sell position. If the price does indeed drop, you can close your position and make a profit from the difference. If the value of the index rises and you close your position, you will incur a loss.
Benefits of index trading
Trading on indices can be an effective way to diversify trader risk, as it provides wider exposure when compared
to trading on an individual stock.
When trading on a stock, fluctuations in the stock price are based on a large number of factors such as performance, revenue, and confidence in their ability to produce exciting products. When trading an index, a handful of poorly performing constituent companies do not necessarily affect the index’s value one way or the other. If a handful
of constituent companies report losses or poor performance, it is still possible for the index to rise, depending on their weight. At the same time, if some companies report gains, the index may fall if a higher weighted company reports losses.
