A CFD is an unlisted instrument that is an agreement between a buyer and seller. These two parties make a contract that the seller will pay the buyer the difference in value of a particular instrument on a daily basis for the period between when the contract is opened and closed. The buyer will, in return, pay the seller the difference in price if its value decreases. The difference is determined by referring to an underlying instrument.

Benefits:

• CFDs enable you to obtain full exposure to an underlying instrument at a lesser price than buying the underlying instrument.
• Short sell stocks – the possibility of showing a profit in a falling market and for efficient hedging of current stock positions.
• Streaming prices give you instant fills and, often, deep liquidity.
• Trading on margin allows clients to leverage CFD investments up to 20 times.
• You can trade any number of CFDs without being constrained to trade pre-defined lot sizes.
• CFDs are a flexible and dynamic tool for investing in any market conditions.
• CFD contracts provide a means to hedge against risk exposure or to speculate when an exchange rate change appears imminent.
• CFDs enable investors to gear (leverage) their investment, while avoiding many of the costs and hassles of trading in the underlying instrument. This means that you are fully exposed to price movements of the underlying instrument without having to pay the full price of that instrument.
• CFDs therefore offer the potential to make a higher return from a smaller initial cash outlay than investing directly in the underlying instrument. CFDs require only a small initial margin to secure a trade.

Trading CFDs is more advanced than normal equity trading and should only be attempted by those comfortable with the concept of gearing.

Features

1. Gearing which amplifies the movement of the CFD relative to the underlying share
2. Reduced trading costs (relative to equities and single stock futures)
3. Corporate actions (earn real dividends)
4. Discount day trading
5. Product simplicity (as compared with SSFs)
6. Short trading
7. Pairs trading
8. No expiry
9. Trading the underlying spot price.