CFD trading costs and commissions explained.

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CFD trading costs and commissions explained.

When beginners engage in the CFD market, they have to be aware that it doesn’t typically have any short-selling rules. This means that your instrument can be shortened at will because there’s no ownership of the underlying asset.

When it comes to CFD stocks, there’s also no borrowing costs, shorting costs, and few or no fees are charged for trading. However, when the trader pays the spread, brokers make some money.

This is because the trader pays the asking price when purchasing and takes the bid price when shorting or selling. So, depending on the volatility of the underlying asset, the spread is often dynamic and, in some cases, can be fixed to a certain value.

CFD trading requires close attention to risks. Traders need to maintain margin and take into account market liquidity. The stock market prices may change as a result of supply and demand as well as political climate and economic environment, industry or business disturbances. Plus, CFD trading involves leverage. Of course, it increases the potential of trades. However, the risks of losses increase as well.

Novices entering the industry need to pay close attention to the broker’s credibility and reputation and make sure they are working with a regulated broker .

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CFD trading costs and commissions explained.

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Risk Warning: Trading on financial markets carries risks. Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, CFDs may not be suitable for all investors because you may lose all your invested capital. You should not risk more than you are prepared to lose. Before deciding to trade, you need to ensure that you understand the risks involved and taking into account your investment objectives and level of experience. Click here for our full Risk Disclosure.

The website is owned by Liteforex group of companies.

LiteForex Investments Limited registered in the Marshall Islands (registration number 63888) and regulated in accordance with Marshall Islands Business Corporation Act. The Company’s address: Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. Email: [email protected]

Liteforex Investments Limited does not provide service to residents of the EEA countries, USA, Israel, and Japan.

How to Trade CFDs

Find out more about Contract for Difference (CFD) trading with City Index.

How to place a CFD trade

With the ability to trade on falling markets, use leverage and access thousands of instruments, some trading 24 hours a day, investors are taking advantage of the versatility of CFDs as part of their portfolio.

CFD trading steps

  • Choose a market
    Decide which market you want to trade on. You can get trading inspiration through our fundamental and technical analysis research portal
  • Decide to buy or sell
    Click ‘buy’ if you think the price will increase in value or ‘sell’ if you think the market will fall in value
  • Select your trade size
    Choose how many CFDs you want to trade. 1 CFD is the equivalent of 1 physical share in equity trades
  • Add a stop loss
    A stop loss is an order to close your position out at a certain price if it moves too far against you
  • Monitor and close your trade
    Once you have placed your trade, you will see your profit/loss update in real time at the top of the screen. You can exit your trade by clicking the close trade button

CFD trading explained

Choosing a market

At City Index, we offer CFDs on thousands of individual markets including shares, indices, currencies, commodities, interest rates and bonds, allowing you instant exposure to major global markets including the UK, US, Europe, Asia, Australia and New Zealand.

With so much choice, it is important to find a trading opportunity that suits you. You can use the research tools provided on the trading platform to help you identify trading opportunities that match your trading style.

Use the search function on the platform or app to search and select your market. Learn more about our research tools here.

Decide to buy (go long) or sell (go short)

Once you have chosen a market, you need to know the current price. You can do this this by bringing up a trading ticket in the platform.

CFD markets have two prices. The first price quoted, is the sell price (the bid), and the second price is the buy price (the offer). The difference between the two is known as the spread. The price of your CFD is based on the price of the underlying instrument.

If you believe a market price will go up, you buy that market (known as going long). If you believe it will fall, you sell the market (going short).

Select your trade size

With CFD trading you select the number of CFDs you wish to trade.

With equity trades, 1 CFD is equivalent to 1 share. When trading indices, FX, commodities, bonds or interest rates, the value of 1 CFD varies depending on the instrument. You can see which number you are trading on by looking up the ‘tick value’ in the instrument’s market information sheets. CFDs are traded in the base currency of the market.

CFD trading is a leveraged product which means you only need to have a small percentage of the overall trade value, known as margin, in your account in order to open the trade. Generally speaking, the larger the value of your trade, the more margin required. It is important that you have sufficient funds in the account to place the trade. The margin calculator in the trading platform will automatically calculate your initial margin for you.

Add stop and limit orders

Before you place your trade, it’s important to consider your risk management strategy.

A key risk management technique is to place an order such as a stop loss that will automatically close the trade if the market reaches a certain level.

A stop loss order is an instruction that allows the platform to close your open position once it reaches a specific level set by you. This will, as the name suggests, be at a price below the current market level and be triggered on losing trades to help minimise losses.

A limit order is an instruction to close out a trade at a price that is better than the current market level and is used to help lock in profit targets.

Standard stop losses and limit orders are free to place and can be placed in the dealing ticket when you first place your trade or once your trade is open.

Monitor your trade

Having placed your trade and any stops or limits, your profit and loss of your CFD trade will now fluctuate with each move in the market price.

You can track market prices, see your profit/loss update in real time and add new trades or close existing trades from your computer or by using our trading app on your smartphone or tablet.

Closing your trade

Once you are ready to close your trade, you need to do the opposite trade to the opening trade or select the ‘close position’ option within the positions window.

By closing the trade, your net open profit and loss will be realised and immediately reflected in your account cash balance.

This will be done for you if your stop loss or limit order has not been triggered.

CFD examples

Review the CFD trading examples to see how CFD trading works in practice.

Trade CFDs on over 5,000 markets

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Pricing and Charges

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Economic calendar

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Trading with us

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% 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.

△ Based on CFD spreads and financing competitor comparison on 28/08/2020.

* Spread Betting and CFD Trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

† 1 point spreads available on the UK 100, Germany 30, France 40 and Australia 200 during market hours on daily funded trades & daily future spread bets and CFDs (excluding futures).

‡ Voted “Best Trading Platform”, “Best Mobile Application” and “Best Spread Betting Provider” at the OPWA Awards 2020. Voted “Best CFD Provider” at the ADVFN Awards 2020. Voted “Best Professional Trading Platform” and “Best Spread Betting Provider” at the 2020 Shares Awards. Voted “Best Cryptocurrency Trading Platform” at the 2020 OPWA Awards.

City Index is a trading name of GAIN Capital UK Limited. Head and Registered Office: Park House, 16 Finsbury Circus, London, EC2M 7EB. GAIN Capital UK Ltd is a company registered in England and Wales, number: 1761813. Authorised and Regulated by the Financial Conduct Authority. FCA Register Number: 113942. VAT number: 524837435.

City Index and City Trading are trademarks of GAIN Capital UK Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© 2020 City Index

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