What is CFD Trading?
A Contract for Difference (CFD) is a contract made between a buyer and a seller for a specified product, where one party agrees to pay the other the price difference between the opening and the closing price of the contract.
CFD trading offers investors access to the financial markets, without buying physical/underlying products. Instead, they purchase contracts speculating on future price actions.
Trading CFDs on Indices
With FXDT, you can trade CFDs on some of the most prominent securities in the U.S., Europe, Australia and Asia. These include, but are not limited to:
- GDAX (Dax 30)
- AUS200 (Australia 200)
- ND100m (US Tech 100 - Mini)
- UK100 (UK 100)
- SP500m (US SPX 500 - Mini)
CFDs are popular with traders because they offer a low-cost entry into the financial markets. Leverage means that traders only need to invest a fraction of the total cost of the contract themselves, enabling them to potentially generate a greater return. However, leverage cuts both ways, and has the same potential to increase losses, as it does to maximise profits.
Trading CFDs on Indices is more costly than trading the underlying index, while offering equal potential to deliver gains. If a trader has a CFD on a long position and the index appreciates, they could even make a greater profit than an investor holding the physical stock. Similarly, they could also make a greater loss if the price declines.
Fast Execution Speeds
CFDs on Indices are available with both instant and market execution. This means your orders are executed with no delay, guaranteeing you fast and efficient trading.
Key features for trading CFDs on Indices:
i) Indices receive dividends depending on the net dividend of the shares they are composed of. FXDT clients trading CFDs on Indices benefit from these dividends.
ii) With CFDs, the same margin requirements apply regardless of whether you’re selling or buying.
iii) Since you can take both short and long positions with CFDs, a bearish market holds the same risks for incurring losses, but it also offers potential opportunities for profit.
iv) Trading CFDs on Indices is far less costly than trading the underlying index, but offers the potential to deliver similar gains and losses.
v) While many traders find CFDs appealing, always remember that they carry the same risk as trading any leveraged asset.
For a full list of Spot Indices offered by FXDT for CFD trading, please visit our Contract Specifications page.