CFD's CFD Trading

asxinfo.com

All Ordinaries Index delayed 20 min

Advertisers

Click Here To Advertise

Welcome to our CFD's explained page.

Welcome to CFD's explained.

Here we will discuss what CFD's are and how they work. We will also discuss the pros and cons of using CFD's versus traditional stocks.

.............................................................................................................................................................................................................

Contract For Difference

So what are these CFD's that are taking the world by storm and why are they so popular?

And how do you get a piece of the action?

Well a CFD is the abbreviated version for Contract For Difference and these contracts work on a very simple principle.They are a derivative product and mirror the stock market and the underlying stock prices exactly. You make a profit or take a loss just as you would based on the underlying stock price. Contract For Difference simply refers to the fact that when you open a position(CFD) you enter into a contract for the difference,wether it be a profit or a loss at the time that you close that position.

The huge benefit with CFD's is that for a small deposit the client can open up a position up to 20 times larger than the initial amount outlaid therefore potentially creating huge profits and accessing trade sizes that would normally not be able to be achieved. Obviously this also works the other way and greater losses can also be achieved so diligence is required.

For example ,instead of purchasing 1,000 shares of Coca Cola from a stock broker, a client could instead buy a CFD on Coca Cola on a trading platform. A $5 per share rise in the price of Coke would translate to a $5,000 profit for the client, just as if he had purchased the actual shares that are traded on the exchange.

Therefore the client is able to have a large portfolio of CFD's without tying up huge amounts of capital.

Aside from the main benefit of CFD's which is the huge leverage potential, most company's providing a CFD service offer very competitive brokerage fees(equivalent to normal stocks.)

Most CFD providers have a good trading platform which can be accessed after signing up and is normally in real time.

Another benefit of CFD's is the ability to buy a "Guaranteed Stop Loss". You pay a small premium for this but have a pre determined price that you are guaranteed to be sold out at.

For example you buy 10 000 ZYZ at $1.00 and when you wake up the next morning a natural diaster overnight has brought havoc to the stock market. Your stock opens up at 0.42 cents. It doesn't matter. You bought a guaranteed stop loss at 5% below the price you bought the stock at so your holding of ZYZ gets automatically sold out at 0.90 cents. No sweat.

Short Selling-Another benefit of CFD's is the ability to go short on stock and indices with ease. Shorting is where the trader or punter expects a stock or market to fall and goes short on a stock instead of long. This way you can easily profit from a falling stock or bear market. When you go short you also get paid interest.

CFD Providers Australia

Currently there are a couple of leading CFD providers in Australia

and we have used both. They are listed below

IG Markets-leading CFD provider who can be trusted. Their head offices are in Australia and London and they have other offices in Singapore and Dusseldorf and have been in the game since the 70's. A provider you can trust. We,at CFD trading.net have used IG and we reckon they are excellent. With tight spreads,reliability and an excellent,easy to use real time trading platform they get our thumbs up.

Click on the banner below to go to their website and learn more about them

and possibly sign up to start your CFD trading career!

CMC Markets- Another leading CFD Provider with offices around the world. To go to the Australian branch click on the orange icon.

CFD Providers United States

Currently there are a couple of leading CFD providers in Australia

and we have used both. They are listed below

IG Markets-leading CFD provider who can be trusted. Their head offices are in Australia and London and they have other offices in Singapore and Dusseldorf and have been in the game since the 70's. A provider you can trust. We,at CFD trading.net have used IG and we reckon they are excellent. With tight spreads,reliability and an excellent,easy to use real time trading platform they get our thumbs up.

Click on the orange icon to go to their website and learn more about them

and possibly sign up to start your CFD trading career!

CMC Markets- Another leading CFD Provider with offices around the world. To go to the Australian branch click on the orange icon

CFD Providers United Kingdom

Currently there are a couple of leading CFD providers in Australia

and we have used both. They are listed below

IG Markets-leading CFD provider who can be trusted. Their head offices are in Australia and London and they have other offices in Singapore and Dusseldorf and have been in the game since the 70's. A provider you can trust. We,at CFD trading.net have used IG and we reckon they are excellent. With tight spreads,reliability and an excellent,easy to use real time trading platform they get our thumbs up.

Click on the orange icon to go to their website and learn more about them

and possibly sign up to start your CFD trading career!

CMC Markets- Another leading CFD Provider with offices around the world. To go to the Australian branch click on the orange icon

So what is spread betting?

With traditional stocks there are two different prices you may purchase or sell that stock at. They are called the bid and offer price.

The lowest price of the two, which is what you would get for your stock when you place an at market sell is called the bid price. This is the price that investors are willing to buy the stock at.

The higher price of the two, which is the price that you would pay for your stock if you were placing an at market bid is called the offer price.

Put simply the difference between the bid and offer prices is called the spread.

With spread betting if the punter or better believes the price of the stock or index is going to go up they will buy(place your bet) at the offer price-the highest price.

Obviously if you were placing a sell bet it would be the exact reverse from the above example.

A spread better will have to decide how much of a bet they would like to wager per penny or per point that the stock or index goes up or down.

Here is an example of a spread better who believes a stock price will go up.

Ok you hear a rumor form a trustworthy friend who is always in the know, that Coca Cola is about to acquire another very successful drink company and you believe if this is the case that Coca Cola is now way undervalued.....

So you decide to place a bet and the spread price quoted is 867-868. You place a $10 per point bet. Your bet will start at the higher price which is 868.

Three weeks later Coca Cola does indeed buy a famous drink company and their spread price now is quoted at 1020 - 1021. Very nice!

Your payout is based on the lowest price of the new spread( 1020 ) So the difference from where you opened the bet is 152 points. To find out how much you have made simply multiply the amount of points made by your bet amount. 152* $10= $1520. Not a bad profit in three weeks.

Check with your tax specialist but one big advantage of spread betting and the reason it is so popular is that it is normally treated as a bet in most countries and is therefore tax free.

Essentially this is how spread betting works.

Where can I find a company that offers spread betting?

Apart from providing CFD Trading the companies below also offer Spread Betting and they are our picks for value,service and reliability...

Click on the icon in your country

Spread Betting Australia

Currently there are a couple of leading CFD providers in Australia

and we have used both. They are listed below

IG Markets-leading CFD provider who can be trusted. Their head offices are in Australia and London and they have other offices in Singapore and Dusseldorf and have been in the game since the 70's. A provider you can trust. We,at CFD trading.net have used IG and we reckon they are excellent. With tight spreads,reliability and an excellent,easy to use real time trading platform they get our thumbs up.

Click on the orange icon to go to their website and learn more about them

and possibly sign up to start your CFD trading career!

CMC Markets- Another leading CFD Provider with offices around the world. To go to the Australian branch click on the orange icon.

Spread Betting United States

Currently there are a couple of leading CFD providers in Australia

and we have used both. They are listed below

IG Markets-leading CFD provider who can be trusted. Their head offices are in Australia and London and they have other offices in Singapore and Dusseldorf and have been in the game since the 70's. A provider you can trust. We,at CFD trading.net have used IG and we reckon they are excellent. With tight spreads,reliability and an excellent,easy to use real time trading platform they get our thumbs up.

Click on the orange icon to go to their website and learn more about them

and possibly sign up to start your CFD trading career!

CMC Markets- Another leading CFD Provider with offices around the world. To go to the Australian branch click on the orange icon

Spread Betting United Kingdom

Currently there are a couple of leading CFD providers in Australia

and we have used both. They are listed below

IG Markets-leading CFD provider who can be trusted. Their head offices are in Australia and London and they have other offices in Singapore and Dusseldorf and have been in the game since the 70's. A provider you can trust. We,at CFD trading.net have used IG and we reckon they are excellent. With tight spreads,reliability and an excellent,easy to use real time trading platform they get our thumbs up.

Click on the orange icon to go to their website and learn more about them

and possibly sign up to start your CFD trading career!

CMC Markets- Another leading CFD Provider with offices around the world. To go to the Australian branch click on the orange icon