A contract for difference (CFD) is a derivative product which enables you to trade on the price movements of underlying financial assets (such as forex, indices, commodities, shares and treasuries). It's an agreement to exchange the difference in the value of an asset from the time the contract is opened until the time it's closed.
With a CFD, you never actually own the asset or instrument you're trading, but you can still benefit if the market moves in your favour, or make a loss should the market move against you.
Trading CFDs involves trading on leverage, which means that you can enter a position with a set initial deposit, known as the margin requirement. It's important to remember that leverage amplifies your gains and losses in equal measure, based on the full value of the trade, and not just the initial margin amount. Learn more about CFD trading
The main risks associated with CFDs are trading on leverage, which means your profits and losses are amplified based on the full value of your trade, and slippage, or market gapping, which can occur in volatile markets. It's important to manage your risk carefully as part of your overall trading strategy.
As a retail (non-professional) client, your account is protected by negative balance protection, which means that you can't lose more than your account value. Learn about the risks of trading CFDs
With CFD trading, you can take a position on both sides of the market. You would go long (or place a buy trade) if you believe the instrument will rise in price; or go short (place a sell trade) if you think the instrument will fall in price. Short selling is a strategy used by traders who want to take advantage of falling market prices.
Any losses you make are limited to the available cash in your trading account. This is because all retail (non-professional) traders are covered by negative balance protection.
However, it's important to remember that as you're trading on leverage, your profits and losses are based on the full value of the trade, and not just your initial deposit, or margin requirement.
While it's certainly possible to make a profit through trading CFDs, it's important to carry out research, and create and test a trading plan before you get started, which should include a risk-management strategy.
You can practise trading on a demo account until you feel ready to trade with real money. View our trading guides to find out more.
The first step is to establish the holding rate for the instrument you are trading. Holding rates can be found within the trading platform by selecting 'Library' from the main menu (which displays the full list of products), then select the arrow icon next to the specific product which will bring up a sub-menu. Choose 'Product Overview' on the sub-menu to bring up the holding rate details.
To calculate your holding rate:
Take your total trade value using the opening price (calculated by multiplying your position size by the opening price), which is displayed in the order ticket when you enter a quantity.
Multiply that by the holding cost percentage (which can change each day) shown in the product overview to get your annualised holding fee.
Divide this number by 365 to calculate your daily cost in the product's traded currency.
Yes you can. After logging in to the trading platform, select the 'Accounts' tab and then 'Positions'. From here you can see your separate position clusters, or an amalgamated total with your average entry price.