What is a CFD?
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A CFD (Contract for Difference) is an agreement to exchange the difference between the entry price and exit price of an underlying share. For example if you buy a CFD at $10 and sell at $12 then you will receive the $2 difference. If you buy a CFD at $10 and sell at $8 then they pay the $2 difference.
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When you enter a CFD contract this does not involve buying the underlying instrument, even though the movement of the CFD is directly linked to the share price. Because you do not own the share you are only required to provide a deposit which could be as low as 5% for Australian shares. This means you can trade up to 20 times your initial capital.
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Why Trade CFDs
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Leverage: CFDs enable you to obtain full exposure to a share for a fraction of the price of buying the underlying instrument. CFDs require only a small initial margin as a trading deposit.
The ability to go ‘short’: CFDs allow you to sell shares you don’t own. This enables you to benefit from falling share prices.
Simplicity: CFDs mirror the price and liquidity of the underlying market
Hedging: CFDs allow you to employ more advanced strategies such as hedging your existing share portfolio.
 Dividends and Corporate actions: CFDs allow you to benefit from dividends or bonus issues which may occur in the underlying instrument on which the CFD is based.
 Cost: Trader Dealer provides the most competitive brokerage structure on the Australian market. Trade $100,000 of stock for just $66. But that’s not all, trade unlimited times in the one stock on the one and well book it as one trade at the end of the day.
Tags: Add new tag, ASX, CFDs, cost, Dividends, Hedging, leverage, Short Selling
