- What does CFD stand for?
CFD stands for Contract for Difference.
- Are there any benefits for buying/selling a CFD over the underlying asset?
Yes, there are. Since CFDs are traded by utilizing leverage. Furthermore, with a CFD account you are able to trade multiple asset classes through a single account.
- Is there more risk involved in buying a CFD over the underlying asset?
Higher leverage also means higher risk but also higher reward. Depending on the level of margin used, small moves in the underlying could magnify losses that exceed your initial deposit.
- Are dividends relevant to CFD’s?
Yes, as CFD’s are derived from an underlying instrument, you will benefit from dividend payments if you hold relevant indices. Please view our trading guide for complete details.
- Are multiple accounts required to trade different types of CFDs?
An FXCM CFD account provides access to Equity Indexes, Foreign Exchange and Commodities Where do the prices for CFDs come from?
- How do you price a CFD?
CFD prices are derived from the assets of the underlying instrument. For example the US30 CFD is derived from the DOW 30 futures index.
- What is margin?
Margin is the collateral required in order to trade. Margin allows an investor to put up only a fraction of a CFD’s full value thereby letting them control a larger position with less capital. (Margin is also referred to as leverage)
- What are the penalties for not being able to meet a margin requirement?
If your total margin exceeds the total equity you hold on deposit in your account the trade will be automatically closed.
- What are the costs and fees involved with trading CFDs?
There are financing charges that are applicable. If you have an open position at the close of business 22.00 UK then your position will be rolled forward to the next business day. The Financing rate is LIBOR + 3% for long (buy trades) and LIBOR – 3% for short (sell) trades.
- How does FXCM make its money?
FXCM makes its money on the bid/ask spread and financing interest.
- Are there expirations for CFDs?
No. A CFD contract will be treated like a cash product with no expiration. However, commodity and fixed income CFDs could be impacted when contracts roll over in the future.
- Is CFD trading limited to certain hours?
Each market has its own defined trading hours that generally coincide with specific exchange hours. Often there are out of hours trading when assets trade in the electronic market. To see the full specifications for each asset, see the CFD Trading Guide.
- Can I place trades when the market for a specific CFD is closed?
A CFD can be traded during its designated trading time (see the full specifications for each asset, see the CFD Trading Guide), but limit and stop orders can be adjusted even when trading is closed, except at weekends and bank holidays where you will not be able to trade or place/adjust limits/stop orders.
- Are there limits to position size?
There are no limits to position sizing. Available margin is the only constraint on the size of a position.
- Are CFD profits unlimited?
FXCM will impose no limits to profit. Only position size will be a factor, which will be determined by the initial market requirement.
- Is there slippage?
Like most markets, CFDs are exposed to slippage. The level of slippage will be impacted by market conditions (liquidity) and position size.
- How quick is the execution?
FXCM operates a ‘no requote’ policy enabling clients to trade in a timely manner.
- Is there a government regulator for CFDs? FSA License and MIFID zone
- In what countries is CFD trading allowed?
CFDs trade in Australia; the United Kingdom; the Euro Zone; Russia; Japan; Canada; South Africa; Switzerland; Canada; and New Zealand among other countries.
- Are there any accounting/tax advantages for trading CFD’s?
Profit and losses in CFDs can be used to offset losses or profits in an underlying trade when used to hedge. But please consult the tax regulations of your jurisdiction.
- What is the liquidity like in Equity CFDs?
Liquidity for CFDs is comparable to the underlying. Different indexes experience different levels of volatility and liquidity. To see the full specifications for each asset, see the CFD Trading Guide.
- Who primarily trades CFDs? Smaller investors or larger institutions?
CFD’s are traded by a wide range of investors, from speculators, those looking to broaden their investment portfolio, hedge funds and banks. FXCM can meet the trading requirement of most investors.
