What is CFD Trading?

Contract for differences (CFDs) are contracts that are tradable between clients and a broker.  When trading a CFD, there is an exchange of the difference in value (current value and value at the end of the contract) of a certain instrument.

These can be CFD shares.

One of the biggest advantages of trading CFDs is that traders may speculate on price movements without the need to physically own the underlying assets. Traders will usually buy or sell a number of units depending on whether they think that the price of the financial instrument will increase or decrease and they can profit or lose depending on whether they speculated correctly or not.

Windsor Brokers offers a variety of CFD instruments.

Example provided below

CFD Shares                               Apple, Ebay, Microsoft, Facebook…

 

  • Market is open 24/5
  • High liquidity
  • Lower costs
  • More trading capacity thanks to leverage. Leverage can magnify your gains/losses.
  • Possibility to profit/lose whichever way the market moves (upwards or downwards)
  • More chances of limiting risks by the use of stop loss orders and risk management strategies. However, trading Forex/CFDs is never risk free.
  • CFDs can be more predictable with the study of technical and fundamental analysis
  • Trading is available via several trading platforms; desktop, mobile, web.
  • Trades can be automated or semi-automatic (EA)

CFDs can be traded based on margin % and are determined by the contract size, leverage, pip value and direction.

For short positions, client opens a trade based on the ‘Bid’ price and closes the position based on the ‘Ask’ price.
For long positions, client opens a trade based on the ‘Ask’ price and closes the position based on the ‘Bid’ price.

Note: Trading of CFDs may involve may involve other fees.

Example:
Microsoft (Symbol: MSFT) contract size: 1,000 shares
Margin requirement: 5%
Account leverage: 1:20

i.e. Client trades 1 lot of MSFT = 1,000 shares
Required margin for 1 lot = 1,000 x 96.85 x 5% = $4,842.59

Client decides to go long on 1 lot of MSFT:

Opening of position based on ‘Ask’ Price: 96.85
Closing of position based on ‘Bid’ Price: 98.85

Difference in price = 98.85 – 96.85 = + 2 x 1,000 = + $2,000

Client decides to go short on 1 lot of MSFT:

Opening of position based on ‘Bid’ Price: 96.85
Closing of position based on ‘Ask’ Price: 98.85

Difference in price = 96.85 – 98.85 = – 2 x 1,000 = – $2,000

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.9% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.