What are CFDs? :: Dukascopy Europe ECN Broker Managed accounts FX trading platform

But you must remember that there is no way to completely eliminate all risks, although there are a few ways to minimise the possible negative effects. If you buy 50 CFDs, your position will be worth $1000 ($20 x 50), but you will only need to deposit a margin of $100 ($2 x 50). If you buy 50 CFDs your position will be worth $1000 ($20 x 50), but you will only need to deposit a margin of $100 ($2 x 50). Those 10,000 shares of Barclays are at 280p, costing you £28,000 and not including any additional fees or commissions.

CFDs and Futures trading are both forms of derivatives trading. A futures contract is an agreement to buy or sell the underlying asset at a set price at a set date in the future, regardless of how the price changes in the meanwhile. Professionals prefer future contracts for indices and interest rate trading over CFDs as they are a mature product and are exchange traded.

  • Although leverage can amplify gains with CFDs, leverage can also magnify losses and traders are at risk of losing 100% of their investment.
  • You’re simply speculating, and potentially profiting, from the same movements in share price.
  • CFD trading is leveraged, which means you can gain exposure to a large position without having to commit the full cost at the outset.
  • In exchange for this, you receive a stock certificate, legal documentation that certifies ownership of shares.
  • MetaTrader is complete with updated tools to give you a smooth, user-friendly CFD trading experience.

With both long and short trades, profits and losses will be realised once the position is closed. We hope this article has been of use to you.You may open a free demo accountanytime you feel ready to try and trade xtrade review philippines on your own. Please understand that trading CFDs is not easy and carries a risk of you losing all the capital in your trading account. Libertex’s trading offering includes numerous assets from global markets and comprises real stocks, and currencies, indices, cryptos etc on CFD’s. The underlying assets available to trade as CFDs vary from broker to broker. Liquid assets are better suited to CFD trading, so most brokers stick to large-cap stocks and popular forex pairs.

As in, they derive their value from the movement of an underlying asset. They allow traders to trade price movements without actually owning the underlying asset. Similarly, you can place stop-losses to mitigate CFD risks and restrict potential losses. A stop-loss is triggered at the level indicated priorly by a trader and will be executed at the next available price quotes. Note, however, that in case of volatile markets, lack of liquidity or big orders sizes can result in slippage.


If you use the $100 to buy the physical shares themselves, you would only be able to buy 5 shares. At the end of each day, if a position shows a profit for the day, that profit is credited to the trader’s account. If the position shows a loss for the day, the loss is debited from the trader’s account. You’re simply speculating, and potentially profiting, from the same movements in share price. A number of CFD instruments is traded outside classic markets trading sessions. Same as Forex trading, CFD trading enables you to buy if you believe market prices will rise, or sell if you believe market prices will fall.

CFDs are bought and sold in the base currency of the underlying market. So, if you’re buying a US share, then your profit or loss will be calculated in dollars. The first is the sell price , and the second price is the buy price . For example, if you want to go long on oil, you could buy an oil CFD that makes or loses you $1 for every point oil moves. You won’t take ownership of any oil, but you’ll still earn a profit or a loss from its price movement.

In particular the way that the potential gains are advertised in a way that may not fully explain the risks involved. The Australian financial regulator ASIC on its trader information site suggests that trading axi review is riskier than gambling on horses or going to a casino. Even a small price change against one’s CFD position can have an impact on trading returns or losses. Since CFDs trade using leverage, investors holding a losing position can get a margin call from their broker, which requires additional funds to be deposited to balance out the losing position.


As a technologically advanced CFD platform, offering the ultimate trading experience, Capital.com has many positive features, which can add to traders’ experience. You believe the market is about to experience a short dip, and are concerned how this will affect the value of your portfolio. Once your account is set up and you’ve devised a trading plan, it is important to determine how much you are willing to risk to formulate an appropriate CFD risk management strategy. If you are risk-averse, then you will be looking for opportunities with lower risk-to-reward (R-R) ratios. The margin required depends on the deal offered by your broker.

Each broker has its own minimum account size and minimum trade size. You will need to check that the available options suit your budget. When prices move too far in one direction, they will often reverse course.

What is margin and leverage?

One of the ways to mitigate this risk is the use of stop loss orders. Users typically deposit an amount of money with the CFD provider to cover the margin and can lose much more than this deposit if the market moves against them. CFD providers then started to expand to overseas markets, starting with Australia in July 2002 by IG Markets and CMC Markets. CFDs have since been introduced into a number of other countries. They are available in most European countries, as well as Australia, Canada, Israel, Japan, Singapore, South Africa, Turkey, and New Zealand, throughout South America and others. At the same time, a number of trading apps with various usage scenarios operate on the market such as eToro, Freetrade, Fidelity Personal Investing , Trading212, among others.


In order to close the position, the trader must purchase an offsetting trade. Then, the net difference of the loss is cash-settled through their account. It can be tempting to try to trade too many types of underlying assets. Instead, you should stick to a few types of assets that you understand and find interesting.

Hedging your physical portfolio with CFD trading

CFD instruments can be shorted at any time without borrowing costs because the trader doesn’t own the underlying asset. The amount you can lose will depend on the size of your trades. With prudent risk management, losses can be managed and minimised. However, losses on short positions and leveraged trades can be significantly higher, which is why such trades ought not to be entered into lightly. Many CFD traders have a variety of trade sizes at their disposal which they can use for various trading styles or investment account types. As a general rule, beginners want to limit themselves to smaller-sized lots until they have developed a successful trading strategy that generates sustained, long-term profits.

One of the key benefits of CFD trading is that you can sell an asset if you think it will fall in value. This is known as going short and enables you to make a profit from falling prices. CFDs can be traded on the industry’s most popular trading platforms, including MetaTrader 4 and MetaTrader 5 . These platforms are equipped with all the tools you need to trade CFDs, including over 50 technical indicators and charting tools. You can also trade on mobile apps, allowing you to keep track of your profits and losses in real-time, on-the-go.


Daily CFDs are mostly intended for shorter-term positions, as they will incur overnight funding chargeswhen held open for more than one day. Forward CFDs have these charges included in the spread, so may be more cost effective if held open over the long term. To close a CFD, you need to trade in the opposite direction to when you opened it. If you bought 500 CFDs at the outset, then you sell 500 CFDs now. If you sold 30 contracts to open, you buy 30 contracts to close.

Dukascopy Recommends

CFDs allow you to tradeforex, shares, indices, commodities and cryptocurrencies with one account and one platform. If you trade the underlying assets, you will need to open a different account for each asset class. A short position, on the other hand, is when you sell an asset in the hope that it will decrease in value. This name derives from the phrase short term since markets typically fall sharply in a short space of time. A CFD, or Contract for Difference, is essentially a contract between a trader and an intermediary .

Dukascopy Wealth Management

You can also trade the UK 100 and Germany 40 from 1 point and Gold from 0.3 points. There is also the option to trade CFDs over traditional share trading, which means that you do not have to take ownership of the physical share. Futures, on the other hand, are contracts that require you to trade a financial instrument in the future. Unlike CFDs, they specify a fixed date and price for this transaction – which can involve taking physical ownership of the underlying asset on this date – and must be purchased via an exchange. The value of a futures contract depends as much on market sentiment about the future price of the asset as current movements in the underlying market. When you trade CFDs , you buy a certain number of contracts on a market if you expect it to rise, and sell them if you expect it to fall.

Without leverage this is capital intensive as all positions have to be fully funded. autochartist oanda make it much easier to access global markets for much lower costs and much easier to move in and out of a position quickly. All forms of margin trading involve financing costs, in effect the cost of borrowing the money for the whole position. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Download today to manage your trades in seconds, view your trading accounts and access live currency rates. FXTM have a range of trading accounts on offer for CFD trading. These are suitable for both beginner and advanced traders alike, and come with an array of competitive leverage and margin requirements.

The costs of trading CFDs include a commission , a financing cost , and the spread—the difference between the bid price and the offer price at the time you trade. The taxes payable on CFD trading vary from one country to the next. In many cases, capital gains tax may be payable on your profits. CFDs are usually exempt from stamp duty which is payable on share trades.

Leave a Comment

Your email address will not be published. Required fields are marked *