TD Waterhouse - Contracts for Difference
TD Waterhouse CFDs provides an alternative method of trading shares without having to pay the full price of owning the stock. CFDs (Contracts for Difference) can be traded 'long' or 'short' to speculate on either rising or falling markets.
What is a CFD?
A CFD is a contract for difference. The contract is an agreement between a broker and a trader to exchange the difference between the share price at the opening and the share price at the closing of a particular trade, so resulting in either a profit or loss.
Instead of paying the full value of the shares you pay a margin, such as 5% or 10% of the actual share value, as a deposit. This means you can trade in larger amounts of shares than if purchasing the actual shares.
There is no fixed expiry date for a CFD trade, the trader closes their position when they wish to either collect their profits or cut their losses.
With CFD Trading you receive many of the benefits of share ownership such as dividends and price performance but you don't actually own the shares.
A CFD is a derivative product. A derivative is a financial product whose value is derived from the value of an underlying security, index, commodity or rate. It is a financial contract between a trader and a provider to exchange future cash flows.
Key Benefits of CFD Trading
- Introductory Low Stake Sizes available for customers new to trading CFDs.
- No UK stamp duty**.
- Benefit from both rising and falling markets by trading long or short.
- Fully interactive online dealing.
- Produce a greater percentage profit or loss from each trade by using leveraging.
- Take advantage of differences in market volatility between equities, indices, sectors, currencies or commodities.
- All trades in GBP - avoid foreign exchange exposure.
- Stop losses available - to reduce financial risk.
** Tax laws may change.
Low Stake Sizes
For an introductory period, you are able to trade with reduced minimum stake sizes, giving you the option to limit your exposure to a level that you are comfortable with. Throughout this period you will have full access to our service, giving you time to build your confidence using our online trading platform. The minimum stake size on spread bets is reduced from the standard minimum stake size for this initial period.
This Introductory Low Stake Sizes trading period lasts for four weeks, and is available as soon as your account is funded. Even though you have been given the option of trading with low stake sizes for the full four weeks, there are no restrictions on larger trades meaning that you move up to larger trade sizes as soon as you are comfortable doing so. Once the introductory period of four weeks is over, the facility to trade with Low Stake Sizes will automatically be removed.
CFD Trading
CFD Trading allows you to make profits even when markets or prices are falling. CFDs can be traded in 2 ways:
Going Long
To buy shares that you expect to rise in value, so as to sell them at a later date to make a profit, you would open a 'long' CFD position.
Going Short
You would open a 'short' CFD position to trade a share that you expect to fall in value, so as to buy them later at a cheaper price and make a profit.
The difference between the opening and closing prices for long and short positions would be counted as profit should the price rise or fall as you so predicted.
Is it right for you?
CFD trading carries high risk, it is possible to quickly lose more money than your initial deposit and you may be required to make further deposits at short notice. CFD trading is not for everyone so please ensure you understand the risks.
Learn more about CFD trading on our website at www.tdwaterhouse.co.uk.