CFD Trading

What is CFD Trading?

Contracts for difference (CFDs) are a derivative product, and the underlying assets include forex pairs, indices, cryptocurrencies, commodities, stocks and indices. These products allow the customer to speculate on the market and to trade on the price of movements without buying or selling the underlying assets.

A CFD agreement (contract) is made between the two parties to exchange the difference in the price of an asset between when the contract is opened and when it is closed. You cannot own the asset or instrument which you choose to trade. You will still benefit if the market moves in your favour, and you will incur a loss if the market moves against you.

CFDs are a leveraged product, which means that in order to open a position you will need to deposit a small percentage of the full value of the trade you have chosen. The term for this feature is known as ‘trading on margin’. It is important to understand that when you trade on margin, your profits and losses will be magnified. Therefore, you should trade within your means and manage your risk accordingly.

What are the advantages of CFDs?

• No stamp duty on CFD trades.*
  This is because you are not taking physical ownership of the underlying asset
  
  
• CFDs requires less margin to open a position than a traditional trade
  Your money will not be tied to one transaction, as you can trade without having to deposit the full value of the position. It is important to note when you trade on margin any losses will be magnified as well
  
  
• Trade and profit from both rising and falling prices
  With CFDs you can short-sell, meaning that there are opportunities to benefit from both rising and falling markets
  * Tax laws are subject to change and depend on your individual circumstances. You should seek independent tax advice before making investment decisions.