The Basics of CFD Trading with City Index Australia

SYDNEY, May 2, 2012 /PRNewswire/ --

Contracts for difference (CFDs) were introduced in Australia almost 10 years ago, which make them a relatively new trading instrument compared to traditional shares. City Index Australia is one of the major CFD providers which offer a wide range of CFDs including share CFDs, index CFDs, FX and commodities.

While the growth and popularity trading CFDs has attracted various types of investors and traders, most of those who trade CFDs have had several years of experience in trading shares, options, warrants and other instruments.

Other traders use CFDs to hedge their share portfolio while some use it for directional trading.

Whether you are new to trading or have been trading for several years, you may find CFDs as a useful trading instrument that could play a vital role in your wealth creation program.

Outlined here are a few basics to help show you how to trade CFDs, so that you may better understand this efficient trading instrument.

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 a share, sector or index. 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 start from 5% for share CFDs and 1% for index and sector CFDs.

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 the financing is paid or received.

What charges are involved in trading CFDs?

Most CFD providers charge commission, but charges vary. Some providers charge a standard rate of commission while others add this cost into the instrument spread. Financing may be paid or received on positions held overnight.

How do I open an account?

To open a CFD trading account, please go to City Index Australia.

About City Index

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

City Index is a leading global provider of margined foreign exchange and CFD trading. As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. To learn more visit: http://www.cityindex.com.au/