Risk Warning Before trading Contracts for Difference, Spread Bets or Foreign Exchange (ForEx or FX), you should carefully consider your investment objectives, level of experience and risk appetite and ensure that you fully understand the risks involved. These products may not be suitable for all types of investor and only for those over the age of 18. You trade on margin which means a small deposit (in percentage terms) gives a big position and losses or profits are therefore magnified.
You can make or lose many times more than your deposit (margin) and so by their nature these products are high risk. Trading in Contracts for Difference/Spread bets/FX is generally considered suitable only for the more experienced investor since trading is leveraged, meaning that whilst a small price movement in your favour can result in a high return on the deposit requirement, a small price movement against you may result in substantial losses.
In some circumstances you may be liable for a greater sum than your initial capital invested. Past performance is not necessarily a guide to future performance. The value of shares or income from your positions may go down as well as up due to the volatility of world markets, economic conditions/data and/or changes in the rate of exchange in the currency in which the investments are denominated.
You may not necessarily get back the amount you invested. Trading can result in incurring liabilities in excess of your initial investment as if you fail to meet any margin requirement, your position may be liquidated and you will be responsible for any resulting losses. You should continually be satisfied that any investment remains suitable for you, in light of your circumstances and financial position and only speculate with money you can afford to lose.
This notice does not disclose all of the risks and other significant aspects of derivative products such as futures, options and contracts for differences and you should make sure you carefully consider if Equitrade Capital Ltd’s products are suitable for you. Equitrade Capital Ltd is a company registered in England and Wales under number 04977383. Registered Office: 257 Hagley Road, Edgbaston, Birmingham. B16 9NA.
Equitrade Capital Ltd (FSA No. 482888) is an Appointed Representative of Equitrade Markets Ltd (FSA No. 441877) a firm authorised and regulated by the Financial Services Authority to provide advice on shares, CFDs, spreadbetting, futures, options and rolling spot foreign exchange
By clicking the 'accept' button below you are agreeing that you understand the above risk warning.
A contract for difference (CFD) is a contract between two parties, buyer and seller, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at the contract time. CFDs reduce traders capital investment amount required, while increasing profit potential.
The key feature is that rather than pay the full value of a transaction you only pay a percentage when opening the position called Initial Margin. The key point is that margin allows leverage, so that you can access a larger amount of shares than you would be able to if buying or selling the shares themselves.
If a position moves against you and reduces your cash balance so that you are below the required margin level on a particular trade, you will be subject to a "Margin Call" and will have to pay additional money into your account to keep the position open or you may be forced to close your position.
- As you are trading on margin, you can maximise your trading capital by use of smaller amounts of capital. This also allows you to trade multiple positions because it leaves you with more available capital.
- You don't actually physically buy the underlying shares, and so you don't have to pay stamp duty (saving 0.5% compared to a traditional share purchase).
- Bull or bear: You can profit from falling or rising markets by trading long or short.
- Dividend adjustment credits are rewarded on long positions
- A single account can give you access to far greater range of financial markets.
- You can limit & manage your risk using a Stop Losses and Limit orders.
- The geared nature of margin trading markets means that losses can be magnified if the market moves against you.
- It is less suited to the long term investor, if you hold a CFD open over a long period of time the costs associated increase and it may be more beneficial to have bought the underlying asset
- Unless you place a stop loss you could incur very large losses if your position moves against you
- You have no rights as an investor, including no voting rights
Because CFDs are traded on margin if you hold a position open overnight it will be subject to a finance charge. Long CFD positions are charged interest if they are held overnight, Short CFD positions will be paid interest.
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Demonstration
A long trade is a position that is opened with a buy in the expectation that the share price will rise. The investor believes that Barclays are going to rise and so buys 10,000 Barclays Shares at 305p. |
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A short trade is a position that is opened with a sell transaction in the expectation that the share price will fall. The investor believes that Barclays are going to fall and so places a trade to SELL 10000 shares as a CFD at 305p |
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| Long Position in US Crude - Buy 100 barrels of US Crude CFDs | ||||||||||||||||
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If you are interested in learning more about CFD trading please Contact Us to discuss your requirements.