CFDs Online

CFDs Online

CFDs Online

CFDs Online

Welcome to CFDs Online - the CFDs Trading website. Get free Contracts for Difference trading tips and strategies, CFD company reviews and trading news. Updated daily we focus purely on CFDs including:
  • Daily Reports from Market Analysts
  • CFD Tips and Strategies
  • Views from industry insiders on the state of the markets
  • How trade CFDs online - also see CFD share trading example
  • Where to trade CFDs - also see CFD Brokers
  • About CFDs

CFD Brokers

  CFD Brokers - CFD Account Comparison
Financial Spreads City Index IG ETX Capital
New Account - Minimum Deposit £0 £100 £0 £0
Maximum Leverage x100 x100 V V
24 Hour CFD Trading Financial Spreads 24 Hour CFD Trading? City Index 24 Hour CFD Trading? IG 24 Hour CFD Trading? ETX Capital 24 Hour CFD Trading?
CFD Trading Charts Financial Spreads - CFD Trading Charts? City Index - CFD Trading Charts? IG - CFD Trading Charts? ETX Capital - CFD Trading Charts?
Stop Loss Orders Financial Spreads Stop Loss Orders? City Index Stop Loss Orders? IG Stop Loss Orders? ETX Capital Stop Loss Orders?
Guaranteed Stop Orders Financial Spreads Guaranteed Stop Orders? City Index Guaranteed Stop Orders? IG Guaranteed Stop Orders? ETX Capital Guaranteed Stop Orders?
CFD Demo Account Financial Spreads CFD Demo Account? City Index CFD Demo Account? IG CFD Demo Account? ETX Capital CFD Demo Account?
New Account Offer Financial Spreads New Account Offer? City Index New Account Offer? IG New Account Offer? ETX Capital New Account Offer?
FSA Regulated Financial Spreads - Authorised and Regulated by the FSA? City Index - Authorised and Regulated by the FSA? IG - Authorised and Regulated by the FSA? ETX Capital - Authorised and Regulated by the FSA?
CFD Comparison Notes

Latest CFD News

For the latest news see our blog: CFD Blog.

CFDs: The Benefits

There are a number of reasons why CFDs appeal to investors. First of all, CFDs allow you to take a long (buying) or short (selling) position in the market. This flexibility allows you to potentially profit from a falling market. If you think that financial market that you are interested in will fall then with CFDs you can speculate on that happening.

Naturally you can buy CFDs when you think that prices will increase. Of course, whether you buy or sell, trading can result in losses.

Secondly, CFDs are leveraged financial products. You can maintain a position in a market with only a small deposit. This means that only a small portion of your capital is tied up when trading and so you can employ your trading capital elsewhere. It also means that market movements are magnified, a useful feature for day traders.

However this leverage can work against you and your losses can exceed your initial deposit. A way to help to restrict this is by using a guaranteed stop order. This is a trading order that automatically closes your position at a predefined level in the underlying market.

Thirdly, you can trade CFDs on a range of financial markets. You are able to open a CFD account with one of the many CFD brokers. A standard feature of many of these CFD accounts is the ability to switch from trading CFDs on, for example, an index such as the FTSE 100, to shares, commodity prices or the forex market.

Finally, there is currently no stamp duty to pay on CFDs*. This is because you do not actually own the underlying financial instruments, you are simply speculating on price differences.

CFDs: The Risks

CFDs can be an attractive financial product to trade. Understanding the risks involved with CFD trading can help you to control your losses.

As mentioned above, CFD trading is a leveraged type of investment and this product involves a high degree of risk. You can incur losses that are greater than your initial stake or investment.

Furthermore, financial markets can prove to be more volatile than you might anticipate. It is advised that you monitor your open CFD positions, so that you do not sustain unanticipated losses.

Online CFDs

The term CFDs simply stands for contracts for difference. The ‘difference’ referred to means that between the buying price, the ‘offer price’ and the selling price or ‘bid price’ of a particular contract.

The value of the contract is based directly on the value of the underlying asset. You are, however, not buying the actual asset. If you buy a CFD on gold, for example, you are not actually buying gold, instead, you are speculating on the price of gold.

A CFD broker will pay you the difference between the price you bought the market at, the ‘offer price’ and the price you eventually sell the market, the bid price. If you should buy a CFD based on the price of one ounce of gold and sell it again immediately, you will lose the difference between the offer price and the bid price, which is part of the broker’s commission. Also be aware that some brokers will add fees each time you buy or sell a trade.

As the day goes by, the bid price might exceed the original offer price you paid, in which case the difference will be your profit. The reverse is true if the price moves against you; you will lose the initial difference between the offer price and the bid price plus the amount by which the price of the asset dropped.

How to Trade CFDs

Only buy a CFD if you are convinced the price of the commodity, equity or currency will increase. Since interest must be paid on your open position at the end of the day, many traders prefer to terminate all their trades before the market closes.

Since you are trading on the price of the underlying asset, you can use both technical and fundamental analysis to try and determine whether the price will move up or down. If you believe it will increase, enter into a long position; if you believe it will fall, take a short position.

There are some differences between long and short positions with CFDs. On long positions, you pay interest and receive any declared dividends, every day. On short positions, you must pay any declared dividends, but you receive interest on your open balance.

For a fully worked example see: CFD share trading.

Be Careful when Trading CFDs

Since the value of a CFD closely reflects the value of the underlying share, commodity or currency, you can treat it in much the same way as if trading in the actual underlying asset.

The difference is that CFDs are leveraged instruments. You could trade with much more money than you actually possess, since you only have to pay a deposit, usually between 14% and 35% of the total. For example, with a deposit of £14,000 you could expose yourself to profits and losses on a total amount of £100,000.

Purchasing CFDs worth £100,000 would mean a deposit of £14,000 and you could potentially double your initial ‘investment’ if the price of the asset increased by 14%. You would make 14% profit, which equals 100% on the amount you actually invested.

The reverse is also true; if the price dropped by 14%, you would lose your entire £14,000 investment. To protect yourself against such a scenario, decide how much you are prepared to lose and set a stop loss at that level. Never put all your eggs in one basket, have a diverse portfolio and never risk more than what you can afford to lose on a single trade.

Warning: Contracts for Difference (CFDs), margined forex and financial spread trading are leveraged products and may not be suitable for everyone. Losses can exceed your initial deposit. Please ensure that you fully understand the risks involved and seek independent financial advice where necessary.

The contents of this website are for information purposes only and not intended as a recommendation to trade nor does the content constitute investment advice. All reasonable efforts have been made to present accurate information. Neither nor any contributing company or individual accepts any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

* Tax law is subject to change. It can also differ if you pay tax in a jurisdiction other than the UK.
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