Contracts For Difference Explained
Spread Betting and CFD Trading on other markets including Commodities, Metals, Bonds, Interest Rates and Options. After hunting around for a trading platform that offers the features he wants, Dan decides that a company he has been monitoring, DAN DAN Enterprises, is set to experience a big jump in its share price, so he ‘goes long’ and buys 4,000 CFDs at $5 each – that means a total contract value of $20,000.
The first company to do this was GNI (originally known as Gerrard & National Intercommodities); GNI and its CFD trading service GNI touch was later acquired by MF Global They were soon followed by IG Markets and CMC Markets who started to popularize the service in 2000.
That trade though, has exposed the trader to £1,000 worth of risk (the risk of losing the entire investment is extremely small, but that is the value of the position) – hence the warning attached to CFD trading losses can exceed your initial deposit.
If you need a quick review on what these terms are all about, it’s time for you to head back to our School of Pipsology lesson on margin and leverage In a nutshell though, both types of trading allow you to control a larger amount of money with the margin as your good faith deposit” to the broker.
The Client acknowledges and understands that the Company will not provide the Client with any advice relating to CFDs, the underlying assets for CFDs and (if applicable) the exchanges where the underlying assets are traded, or make investment recommendations including occasions where the Client shall request such advice and/or recommendation.