A Contract for Difference (CFD) is an agreement between you and a broker to exchange the difference in an asset's price from the time you open the contract to when you close it.

You do not own the underlying share or index. You are taking a position on whether its price will rise or fall.

CFDs are over-the-counter (OTC) products, they are not traded on a public exchange. The broker quotes prices that mirror the exchange-traded underlying.

CFDs are leveraged. You deposit only a fraction of the position size, typically 10% to 20%, called margin, but your profit or loss is calculated on the full position. This means small price movements can produce large gains or losses.

CFDs typically suit experienced traders who actively monitor their positions, understand leverage, and can afford to lose the money they put at risk. They are also used by some investors to hedge existing share holdings. For example, opening a short CFD on a stock you own to offset a short-term price decline without selling (and incurring tax on) the underlying position.

CFDs are not suitable for investors building long-term wealth or saving for retirement. The financing costs alone erode returns over time, and the leverage means that adverse moves which a buy-and-hold investor would simply ride out can produce permanent losses.

• Leverage risk: small price movements produce large gains or losses. You can lose more than your initial deposit.
• Margin call risk: if the market moves against you, you must deposit more funds quickly or have your position closed at a loss.
• Financing cost: holding CFDs for long periods erodes returns through daily financing charges.
• Market risk: share and index prices are volatile and can move unpredictably on news.
• Counterparty risk: CFDs are over-the-counter products. You are exposed to the financial stability of the CFD provider.

Margin and how it works

Initial margin is the amount you must deposit to open a CFD position, typically 10% to 20% of the position's notional value, depending on the underlying asset and its volatility. Standard Bank reserves the right to change margin requirements without prior notice, particularly for large positions or portfolios considered higher risk.

Maintenance margin is the minimum equity you must keep in your account to maintain open positions. If your account equity falls below the maintenance margin, you are in a margin shortfall and must act.

Margin shortfall and stop-out

When the market moves against you and your margin falls below the required level, you have three options: deposit more funds, close part of your position to reduce margin requirements, or close the entire position. If you do not act, the platform may close (stop-out) your positions automatically to prevent further loss.

Stop-outs do not necessarily happen at the level you expect. In fast-moving markets, the closing price can be materially worse than the level at which the stop-out was triggered. This is one of the primary ways CFD traders lose more than their initial deposit.

Financing costs

Long CFD positions are charged a daily financing cost (you are effectively borrowing the full position value). Short CFD positions may receive interest, but in current rate environments often also incur a small cost. Financing is calculated daily based on a benchmark interest rate plus a spread, applied to the position's notional value.

Over weeks and months, financing costs compound. A position held for several months can accumulate financing costs that materially affect profitability, which is why CFDs are short-term instruments by design.

Corporate actions

If the underlying share pays a dividend, splits, or has another corporate action, your CFD position is adjusted to reflect this. Long positions receive dividend-equivalent payments; short positions pay them. Splits and consolidations adjust position size and price proportionally.

A warrant is a listed contract that gives you the right, but not the obligation to buy or sell an underlying asset at a fixed price (the strike price) by a set date (the expiry date).

A call warrant gives you the right to buy. A put warrant gives you the right to sell.

You pay a price for the warrant (called the premium). If exercising the warrant would be profitable, you can do so. If not, you let it expire and you lose the premium you paid.

Warrants typically suit experienced investors who understand options-style instruments and want either targeted exposure to a price view or a way to hedge an existing position.

They are not suitable for investors who do not understand how leverage and time decay work.

• Total loss risk: if the underlying does not move enough by expiry, the warrant becomes worthless. You lose 100% of what you paid.
• Time decay: a warrant loses value as the expiry date approaches, even if the underlying price does not change.
• Leverage risk: warrant prices move in larger percentages than the underlying asset, in both directions.
• Issuer risk: warrants are issued by a bank. If the issuer fails, the warrant may not pay out.

Pricing components

A warrant's price is made up of two components. Intrinsic value is the difference between the underlying price and the strike (if favourable) for a call warrant on a R50 strike where the underlying is at R55, intrinsic value is R5. Time value is the additional premium reflecting the possibility that the warrant could become (or become more) profitable before expiry.

As expiry approaches, time value decays toward zero. By expiry, the warrant is worth only its intrinsic value or nothing, if there is none.

The gearing ratio

A warrant's gearing (sometimes called "effective gearing" or "delta gearing") measures how much the warrant price moves relative to the underlying. A gearing of 5 means a 1% move in the underlying produces approximately a 5% move in the warrant. Gearing is what makes warrants attractive and what makes them dangerous. Higher gearing means higher leverage in both directions.

Cash settlement

Most JSE-listed warrants are cash-settled rather than physically settled. At expiry, if the warrant is profitable, you receive a cash payment equal to the intrinsic value, multiplied by the number of warrants held and the conversion ratio. You do not actually buy or sell the underlying share.

Liquidity

Warrants are issued in finite quantities. Some warrants particularly out-of-the-money warrants close to expiry  can have thin liquidity, meaning you may not be able to exit at the price you expect. Check bid-offer spreads carefully before opening a position you cannot easily close.

Currency trading (or foreign exchange FX) means taking positions in currency pairs to profit from exchange rate movements. This is different from simply converting currency to travel or save offshore which is a one-way transaction at the prevailing rate.

Currencies are traded in pairs. The first currency is called the base currency (the one you're trading), the second is the quote currency. When you go "long EURUSD," you are buying euros and selling US dollars. When you go "short USDZAR," you are selling US dollars and buying rands.

Most active traders focus on the most liquid pairs known as "the majors" which include the US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. There are fewer major currencies to follow than the thousands of shares in equity markets, which is part of FX's appeal.

Leverage in retail FX is typically high much higher than in shares. This means you control a large amount of currency with a small deposit, which makes small exchange rate movements meaningful, but also magnifies losses.

FX trading is suitable for speculative traders looking to monitor positions closely given the volatility and speed in which leverage positions can move. It has great upside potential coupled with high risk and the downside risk is just as significant. Trading Spot FX requires discipline and risk management skill.

• Extreme leverage risk: small adverse movements can produce large losses, potentially exceeding your initial deposit.
• Volatility risk: currencies move on news (political events, economic data, central bank announcements) that can be sudden and unpredictable.
• Margin call and stop-out: positions may be closed automatically if losses approach your account balance.
• Slippage in fast markets: in volatile conditions, your fill price can be materially worse than the price displayed.
• Transaction costs: spreads on frequent trades can eat significantly into profits.

Technical mechanics worth knowing

Trade Ticket colours and what they mean

FX Trade Tickets on Trader are colour-coded to show the status of the price quoted to you. Green means live streaming prices are available for automatic execution. Yellow means prices are available on a Request for Quote (RFQ) basis a dealer will manually quote the price, which then becomes green and tradable. Purple means the market is closed and neither trading nor RFQ is available.

Trade on Quote

The primary way to execute an FX trade on Trader is "trade on quote." When you click a green tradable price, you will generally be filled at that exact price. In rare cases, if the market moves significantly between the time you click and the time the request is received either against you or in your favour the trade may be rejected. This applies symmetrically: significant moves in your favour can also cause rejection.

Pricing bands and reload periods

Spreads vary by trade size, organised in bands. The tightest spread applies to the smallest band. As trade size increases, spreads widen. Trade amounts above the largest band are quoted manually via RFQ rather than automatically.

When you trade, a reload period begins. If you make consecutive trades in the same currency pair within the reload period, spreads may widen beyond the fixed spread because your dedicated liquidity is reduced. After 20 seconds with no trading activity in that pair, the reload period elapses and full liquidity and normal spreads return.

This matters most for active scalpers and rapid-fire traders. If you are placing trades minutes or hours apart, you will not encounter widened reload spreads.

Minimum trade sizes

For most currency pairs the minimum trade size is 5,000 units of the base currency. Some pairs have variations. Precious metals can be traded from as low as 1 ounce. Trades cannot be executed below the minimum, except to close an existing position that is already below the minimum.

FX trading hours

FX Spot trading is open from Monday 5:00am Sydney time to Friday 5:00pm New York time. Some currency crosses have special trading hours these are listed in the Commissions, Charges and Margin Schedule.

Value dates and Tom/Next rollover

Most FX Spot positions have a value date of T+2 they would settle two business days after execution. Some exceptions (USDTRY, USDRUB, USDCAD) have a value date of T+1.

In practice, FX Spot positions on Trader do not settle. Open positions held at the end of the trading day (17:00 New York time) are rolled to the new spot value date through a process called Tom/Next rollover. The rollover has two components: the Tom/Next swap points (reflecting the interest rate differential between the two currencies) and the financing of unrealised profits or losses. The net credit or debit is added to or deducted from your previous opening price.

This is how holding FX positions overnight has a financing impact positive or negative depending on the direction of the position and the interest rate differential.

FIFO netting

Open FX positions are netted using First-In, First-Out (FIFO) rules. The first position opened is the first position to be closed.

Example: you open a long 1M EURUSD, then a second long 1M EURUSD, then a short 1M EURUSD, then a short 2M EURUSD. Total net position: short 1M EURUSD. The FIFO order closes the first long against the first short, and the second long against half of the second short leaving a net short of 1M.

Margin and stop-outs

You must maintain the required margin collateral at all times. If the margin required to maintain your position exceeds the funds available, you are in breach of margin requirements and must act immediately either reduce position size or add funds.

If you do not act, the platform may execute a stop-out, closing your positions on your behalf. Margin requirements can change without prior notice, and Standard Bank reserves the right to increase margin for large positions or higher-risk portfolios.

Order types and execution

Supported order types include Market, Limit, and Stops (including "No Slip" Stop, Stop if Bid, and Stop if Offered, with Trailing Stop support across all three Stop types).

All Stop and Limit Orders can be placed as Day Orders (which expire automatically at 17:00 New York time) or Good-Til-Cancelled (GTC) orders, which remain open until cancelled or filled. One-Cancels-Other (OCO) orders consist of two linked orders where the execution of one automatically cancels the other.

Market Orders are filled at the current available price and never normally rejected but they can experience slippage. Limit Orders are filled at the limit price or better, never worse. Stop Orders are typically filled at the stop level, with the exception of Stop if Bid/Offered which fill on the opposite side of the spread.

Stop if Bid vs Stop if Offered

Stop if Bid is used to limit losses on short positions; Stop if Offered limits losses on long positions. These are designed to prevent the order being triggered by a temporary spread widening (sometimes lasting a fraction of a second).

The platform defaults to Stop if Bid for Buy orders and Stop if Offered for Sell orders. Use the platform default unless you have a specific reason to do otherwise. Using Stop if Offered for buys or Stop if Bid for sells can cause premature closing of positions during brief spread events.

Trailing Stop example

Example: you open a long position at 1.5680, expecting the price to rise to 1.5710. You place a trailing stop at 1.5670 with a distance to market of 10 pips and a trailing step of 5. During the day, the price rises as predicted and the trailing stop follows. When the price reaches 1.5710 and then suddenly drops, the trailing stop having reached 1.5705 is triggered. You have protected your initial position and locked in most of the profit.

The risk is setting the trailing stop too tight: in a volatile market, normal price fluctuation can trigger the stop before the move you anticipated has played out.

Automatic vs manual order fill

The vast majority of FX orders are filled automatically without manual intervention. Manual review is performed for very large orders, during highly volatile conditions (such as around key economic releases), or in illiquid pairs without a streaming price. Some pairs  for example USDRUB and USDCZK are filled manually regardless of size because of low liquidity. Partial fills are not supported on FX Spot, except for very large orders that the third-party broker may fill partially with a new order placed for the remainder.

Small trade ticket fee

For FX trades below the ticket-fee threshold, a small fee of USD 10 is added to the trade to cover administration costs. Full details are in the Commissions, Charges and Margin Schedule.