Getting Started with CFDs

WHAT ARE CFDS

A Contract for Difference (CFD) is a trading instrument which allows you to make a profit or loss by reference to fluctuations in the price of the underlying Asset, without actually owning the underlying Asset. The amount of the profit or loss will be the difference between the price when the CFD position is opened and the price when it is closed.

The contracts require a deposit which is smaller than the contract size, this means the contract is leveraged. Which allows you to maximize your potential profits if your prediction is correct.

A position is opened by ‘buying’ or ‘selling’ a CFD:

BUYING – If you expect an instrument (be it a stock, currency, commodity, index price) to rise, you buy the CFD.

SELLING – If you expect an instrument (be it a stock, currency, commodity, index price or other) to fall, you sell the CFD.

For example:

Oil is quoted at $46.13 (SELL) to $46.18 (BUY). You assess the price of Oil as being under-priced and predict that the price of Oil will rise. You now open a Buy position and buy 50 barrels (amount) at the offered price ($46.18) and wait for the market to react.

That’s it. The position is opened and you can monitor it on the CFD OPEN POSITIONS section.

The price of Oil has increased and is now $46.23. You close the position and your potential profit is the sum of pips rised:
$46.23 - $46.18 = 5.00
+5.00 x 50 (amount) = $250 potential profit.
If your prediction is wrong, you may lose part or all your invested capital. However, you can limit your losses by using a Stop Loss order.

TRY IT YOURSELF

Use this trading simulator to open your first trade.