CFD Trading

CFD is short for 'Contract for Difference' and, put simply, CFD trading involves an agreement (or contract) made between the investor and (the) CFD brokers to exchange the difference in value of a specified stock or index at open and close of the contract. CFD trading is a form of derivatives trading – meaning you speculate on market movements without buying the underlying instrument (such as the stock) itself. Below you will see a wide selection of good CFD trading platforms or CFD brokers. Use the table to compare the main features of each of the CFD trading services, what is the initial margin and how much interest is involved? Once you have made a choice simply click on 'Apply' to proceed. Please read the terms and conditions of each company before you apply.

CFD Trading Is Risky

The first thing to know about CFD trading is that while the yields can be high it also carries a high level of risk. With CFD trading you should only trade you should only trade with money you can afford to lose. It is possible for you to lose more than your initial deposit so please ensure CFD trading meets your investment objective and seek independent advice if necessary.

What are the basics of CFD trading?

Contracts for Difference also known as CFDs allow investors to trade shares actually owning them. The trader creates a contract with the broker. The trader will then bet on a particular stock price and whether that price will go up or down. He then considers how many shares he will bet on. If he is right then, when he chooses to close the contract he will be paid the difference between the starting price and finishing price times by the amount of shares in the contract. Should his estimate be incorrect and the markets turn against him, the trader will lose and must pay the broker the difference.

CFDs are made on margin. So, if you buy a CFD are likely to pay approximately 10% of the stock you trade. The other 90% will be lent by the broker. Due to this, you will earn the profit if the markets go in your favour. However, if they turn against you, you will owe the broker the losses of the whole contract.

How does CFD trading function?

CFDs are financial products which give traders exposure to markets. However the costs involved are cheaper as you don’t need to own a share. Unlike a futures contract, there is no fixed size to the contract, and no fixed end date. Therefore, at the end of each trading day, the CFD can be rolled forward so the position is left open without an end date - as long as the investor account can support this.

Is it easy to make money CFD Trading?

CFDs can offer a number of different strategies; you can go long which means that the trader's account will receive a proportional payout when dividends are paid on the share, and interest will be debited. You can also go short which means that the trader receives interest and pays dividends. Dividend payment will be an equal amount to the full dividend paid on the share.

Are CFDs a long term investment?

Trading CFDs is not usually a long term investment and functions better as a short term investment. This is because they are traded on margin. The investor is charged interest on his or her bets - the longer the investor holds a CFD, the more the interest will increase and could become very expensive. Long CFDs carry interest charges of around 6.5% of the contract value.