Contracts For Difference and Margin Trading Workings

What is a Contract for Difference?

CFDs offer you the ability to deal in the price movements of a wide range of financial instruments, such as stocks, without actually owning the underlying asset. Like traditional share dealing, the scope is for speculators to profit from the price moving in their favour, but CFDs give you the potential to profit from both rising and falling markets.

What are the Benefits?

More and more trading and investors are starting to use CFDs as part of investment strategy. CFDs offer several advantages over traditional methods of investing including:

  • The ability to profit from both rising and falling prices.
  • Leverage or gearing; putting up only a fraction of the full contract value.
  • No Stamp Duty in the UK or Ireland
  • Sophisticated online trading platform allowing you to deal in a wide range of markets from a single account.
  • Low commissions costs across a wide range of markets.

What is Margin Trading?
Margin trading is one of the most powerful attractions of contracts for difference, enabling you to trade an entire portfolio, without tying up large amounts of capital. When you place a deposit of, for instance $10,000 in your account, you can trade up to $100,000 worth of shares. This represents a leverage factor of 10:1 or to put it another way, a margin requirement of 10%. Please Visit:- fx사이트

It is worth noting that although the normal margin requirement is 10% for CFDs in FTSE 350 shares, some of the shares listed on main index markets will only require a 5% margin. For smaller companies or if a share price is especially volatile, the margin requirement may be set above 10%.

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