Friday, May 3, 2013

CFD Trade Sample

Contracts for difference or (CFD) is an agreement between two parties to exchange at the close of the difference in value of the underlying instrument (e.g. share) between the time at which the trade is opened (purchased) and the time at which the trade it is closed (sold).

A CFD is a tool for trading almost any financial product on a leveraged basis. It is similar to trading a share (equity). CFDs are available for stocks and commodities such as corn, wheat, gold and silver. One big advantage they offer is that you do not have to put 100% of the nominal value of the instrument. CFDs are valuable instruments for both growth and to protect your overall portfolio. By using margin, clients can increase the profits of their initial investment that would otherwise unattainable.

Why Trade CFDs?
  • CFDs allow Money Managers to trade on consistent margin allowing for more efficient leverage on client’s positions maximising greater profits (or losses) for the same initial investment.
  • No restrictions on short selling, limit or Instant execution and improved liquidity with automatic stop losses, allowing more efficient leverage. Allowing client to take advantage of both rising and falling markets reducing risk of unexpected market movements.
  • CFDs have no fixed expiry date, giving freedom to close a position when you choose.  Interest is debited or credited to reflect interest and dividend adjustments.
  • CFDs have no fixed minimum spread, no minimum deal size and no minimum deposit obligation.
  • CFDs do not confer ownership rights and are therefore not currently subject to certain taxes.

CFDs at ICM Brokers 
ICM Brokers focuses on giving access only to those equity CFDs that are well capitalized, highly liquid, and most desired by online traders.  By limiting our product offering, we are able to guarantee best market execution for our customers.

Margin Requirements
In order to buy or sell 1 CFD contract (lot) with ICM Brokers, the investor must have a minimum of $1,000 in the account ($2,000 when market is closed or during holidays).  In order to guarantee that clients accounts do not extend into negative equity, the trading platform automatically closes all positions at the 50% Equity/Margin ratio.

Profit and Loss Calculation Examples
Sell 2 GE at 14.20  |  Buy 2 GE at 13.10
   14.20 (open price)   x 2 (lots traded) x 1,000 (contract size) = 28,400
   13.10 (close price)   x 2 (lots traded) x 1,000 (contract size) = 26,200
                                                                                       $ 2,200 (Profit)
Buy 3 IBM at 84.60  |  Sell 3 IBM at 86.10
   84.60 (open price) x 3 (lots traded) x 1,000 (contract size) = 253,800
   86.10 (close price) x 3 (lots traded) x 1,000 (contract size) = 258,300
                                                                                       $ 4,500 (Profit)

To know more about our ICMBrokers CFDs Instruments please click the link: ICMBrokers CFDs Equity


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