CFDs

Help and advice on Contracts for Difference (CFD) trading

CFDs

What is a CFD?

A CFD offers you all the benefits of trading shares without having to physically own them. Simply put, it is a contract that mirrors the performance of an underlying instrument. It is traded on margin, and just like physical shares your profit or loss is determined by the difference between the price you buy at and the price you sell at.

What is margin trading?

Margin trading allows you to free up your capital by placing only a small percentage of the value of trade in your account. Profit and loss is credited and debited to your margin deposit as the market moves. Margins are typically 10% or less on Share CFDs and 1% on Index, Commodity and Treasury CFDs. 

What is the minimum deal size?

The minimum deal size is one (1) CFD. This is the equivalent of one share.

Can I trade over the telephone?

Yes, CFDs can be traded over the telephone, although clients will generally find that trading over the internet is faster than telephone trading. There is, however, no penalty for trading over the telephone. 

Why are some trades denominated in different currencies?

Trades placed on US, European or Asian markets are denominated in the currency used by the exchange. Your P/L will be reported in the currency of your choice, and different currency ledgers are created on your account. 

What is the life of a CFD trade?

A CFD is an open-ended contract, if you have not closed your position by the end of the trading day, then the position is rolled into the next day. At this point, financing is paid or received. Provided that you maintain enough available margin, your position is maintained indefinitely.

Can I receive dividends with CFDs?

Yes. Although a CFD trader does not physically own the share, s/he can partake in Corporate Actions and receive dividends. However, as the CFD trader does not own the share itself, s/he is not entitled to any voting rights. 

How can I profit using CFDs in a falling market?

A client can short sell Share and Index CFDs. This means that the trader can sell a CFD as an opening position. "How can a trader sell something they don't own?" This can be done as what the client is buying is a contract between themselves and the CFD provider, based upon the price movement of a share. It does not matter who agrees to buy and who agrees to sell, as neither party physically owns the share anyway. The important thing is how far the price of the Share or Index moves, and whether or not it moves the way you want it to. Using this facility, a trader may be able to profit from a falling market. 

Do I need to have previous trading experience to trade CFDs?

Beaufort will need to determine whether CFDs are appropriate for you, taking into account what you tell us about your knowledge and experience of the financial markets. 

How do I open an account?

To open an account, please click here or contact the Beaufort Securities CFD Desk on 020 7382 8383.