Contracts For Difference and Margin Trading Workings

What exactly is 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 resource. Like traditional share dealing, the particular scope is for speculators to benefit from the price moving in their favour, yet 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 various advantages over traditional methods of trading including:

The ability to profit from both increasing and falling prices.
Leverage or gearing; putting up only a fraction of the complete contract value.
No Stamp Duty in the UK or Ireland
Sophisticated on the internet trading platform allowing you to deal in a wide range of markets from a single accounts.
Low commissions costs across a wide range of markets.
What is Margin Trading?
Margin trading is one of the most powerful attractions associated with contracts for difference, enabling you to business an entire portfolio, without tying up large amounts of capital. When you create a deposit of, for instance $10, 1000 in your account, you can trade as much as $100, 000 worth of shares. This represents a leverage element of 10: 1 or to place it another way, a margin requirement of 10%.

It is worth noting that even though 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 businesses or if a share price is especially volatile, the margin requirement might be set above 10%
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