Contracts for Differences

A Contracts for Differences (CFDs) is an agreement between two parties to exchange the difference between the opening price and closing price of a contract.

CFDs are derivatives products that allow you to trade on live market price movements without actually owning the underlying instrument on which your contract is based.

You can use CFDs to speculate on the future movement of market prices regardless of whether the underlying markets are rising or falling. You can go short (sell), allowing you to profit from falling prices, or hedge your portfolio to offset any potential loss in value of your physical investments.

Similar to trading Forex, CFDs allow investors to hold both “long” and “short” positions granting the retail trader with the opportunity to profit in either a rising or falling stock market. Additionally, investors have the convenience of limiting losses or claiming gains by using stop losses and limit orders.

Because CFDs are traded on margin rather than paying the full value of a transaction, the investor only needs to pay a percentage when placing a trade. Trading with margin grants the investor with leverage, which in turn allows the investor to access a larger amount of shares than buying or selling actual stock shares. By offering CFDs, we are allowing our investors to speculate on instruments and markets that may otherwise be unavailable or difficult for them to trade.

World Major Indices Introduction

CSI 300 Index

The CSI 300 is a capitalization-weighted stock market index designed to replicate the performance of 300 China A shares traded in the Shanghai and Shenzhen stock exchanges, compiled by the China Securities Index Company. CSI 300 is designed for use as performance benchmarks and as basis for derivatives innovation and indexing.

Hang Seng Index

The Hang Seng Index (HSI) was started on November 24, 1969, and is a freefloat-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the 50 largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.

Deutsche Boerse AG Stock Index

The DAX is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. DAX measures the performance of the Prime Standard's 30 largest German companies in terms of order book volume and market capitalization. The DAX was started on 30 December 1987 with a base value of 1,000.

Dow Jones Industrial Average

The Dow Jones Industrial Average is a stock market index consisting of the 30 large publicly owned companies based in the United States, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. The industrial average was first calculated on May 26, 1896.

NASDAQ 100 Index

The NASDAQ-100 is a stock market index made up of 107 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The stocks' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components.

UK FTSE 100 Index

The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization maintained by the FTSE Group. It is seen as a gauge of prosperity for businesses regulated by UK company law. The index began on 3 January 1984 at the base level of 1000.

What is Contracts for Differences （CFDs）？

CFDs are derivatives products that allow you to trade over-the-counter on live market price movements without actually owning the underlying instrument on which your contract is based. CFDs is an agreement between two parties to exchange the difference between the opening price and closing price of a contract. CFDs allows you to make a profit from the equity (such as dividend, price, etc.), but you do not have the actual holdings of shares. For short-term technical trading and hedging spot market positions, CFDs is an ideal trading tool, but it also attracts long-term investors.

How does the CFDs market operates?

As with traditional share dealing, CFD prices are quoted as a Bid (the price at which you can sell) and Offer (the price at which you can buy). CFDs are traded on margin (also known as leverage), which means that to open a position you need to deposit a small fraction of the full value of your trade, known as initial margin. The initial margin required varies across different markets though would typically be between 10%-25% for an equity CFD trade and between 2%-5% for an index or currency trade.

What is margin and leverage?

CFDs are a leveraged product, which means that you only need to deposit a small percentage of the full value of the trade in order to open a position. This is called 'trading on margin' (or margin requirement). While trading on margin allows you to magnify your returns, your losses will also be magnified as they are based on the full value of the position, meaning you could lose more than any capital deposited. As CFDs is a margined product, there are overnight financing charge when you hold your CFD position open.

Leverage your investment potential

One of the main advantages of CFD trading, as compared with conventional types of trading, is that you can gain the same amount of market exposure by depositing just a small fraction of the total value of your trade.

Managing Risks

With CFD trading, you can optimise your market exposure by depositing a small fraction of your trade value as margin against your total trade value. We offer a range of tools such as stop loss orders, trailing stops, and limit orders to help you to better manage your CFD trading portfolio without the need to be watching your open trades constantly. When your Margin Level is at or below your Margin Close Out Level, we may close all or any of your open positions to prevent you from losing more than your deposited capital.

What financial instrucments can be traded with CFDs?

At Sapphire TradeX we offer CFD access to different financial instrucments around the world, including equities, indices, commodities and precious metal. CFD trading gives you access to a wide range of markets that would not otherwise be available to retail investors all from one trading platform.

Is it possible to buy (long) or sell (short) CFDs?

CFDs can be used to buy (long), sell (short) or hedging, thus offering opportunites to profit in either rising or falling markets. With CFD trading it's possible to sell (short) a product if you believe it will fall in value with the aim of profitting from the predicted downward price move. If your prediction turns out to be correct, you can buy the product back at a lower price to make a profit.