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Home / CFD Trading

CFD Trading

WHAT ARE CFDS (CONTRACTS FOR DIFFERENCE)?

A CFD is a contract on an underlying asset (for example, a share, commodity or currency) to pay or receive the difference between the opening price and the closing price of the asset.

In many ways, CFDs are very similar to the underlying assets on which they are based (e.g. shares). The difference is the leverage, which means movements are magnified.

CFDs: The Main Benefits and Features

  • No stamp duty due on CFDs* (currently 0.5% on UK shares, or £50 on a £10,000 position).
  • Make money if the price rises or falls (i.e. go long or short) – providing, of course, that you get it right!
  • Less initial outlay. For example, you can control £10,000 worth of Vodafone shares for £2000.
  • No contract expiry – hold the position for as long as you want.
  • Deal at market prices – no extra spread.
  • CFDs are available on a vast range of assets, from blue-chip and small-cap stocks to commodities and currencies.
  • Execute orders instantly online
  • Leverage means your profits are magnified. However, it is important to remember that your potential losses are also magnified.

* Tax treatment depends on your individual circumstances and may change.

CFD EXAMPLE

GOING LONG

In this example, an investor wishes to go long of (buy) £10,000 worth of Anglo-American shares, currently priced at £10 each. The investor believes Anglo-American’s share price is likely to rise. Accendo Markets offers Anglo-American on a 20% margin, so the investor only needs to invest £2000 (£10,000 x 20%) to open this position using CFDs.

Opening Trade
CFD Standard Shares
Initial £2000 £10,000
Total Value of Shares £10,000 £10,000
Number of shares 1,000 1,000
Stamp Duty 0 £50
Commission (0.25%) £25 £25

After a ten day holding period, the Anglo-American share price has risen to £11. The investor decides to close the position and realise a profit of £1 per share.

Closing Trade(Gain)
CFD Standard Shares
Overnight Financing Costs* £9.55 0
Commission £27.50 £27.50
Total Cost £62
(£25+£9.55+£27.50)
£102.50
(£25+£50+£27.50)
Closing Value of Shares £11,000 £11,000
Total Profit (£1000-£62)
£938
£897.50
(£1000-£102.50)
% Return on Initial Outlay 46.9% 8.97%

Alternatively, after a ten day holding period, the Anglo American share price could have fallen to £9. The investor decides to close the position and realise a loss. However, a stop-loss was placed on the position at £9.50, reducing the loss.

Closing Trade(Loss)
CFD Standard Shares
Overnight Financing Costs* £9.55 0
Commission £25 £25
Total Cost £59.55
(£25+£9.55+£25)
£100.00 (£25+£50+£25)
Closing Value of Shares £9,500 £9,500
Total Loss £559.55
(£500+£59.55)
£600

*Overnight financing is based on LIBOR, and is therefore variable.

GOING SHORT

An investor believes the price of British Telecom (BT) is likely to fall, and therefore wishes to short (sell) £10,000 worth of BT shares, currently priced at £1 each. Shorting an asset is a ‘mirror image’ of buying it.

The investor is unable to short the BT shares with a traditional stockbroker, and is therefore unable to capitalise on a price drop using traditional shares.

Opening Trade
CFD Standard Shares
Initial outlay £2000
Total Value of Shares £10,000
Number of shares -10,000
Stamp Duty 0
Commission (0.25%) £25

As expected, the BT share price falls to 90p ten days after the position is opened. The investor decides to close the position and take a profit.

Closing Trade
CFD Standard Shares
Overnight Financing Costs* £7.55
Commission £25
Total Cost £57.55
Closing Value of Shares £9,000
Total Profit £942.45
% Return on Initial Outlay 47.1%

*Overnight financing is based on LIBOR, and is therefore variable. When interest rates are low, negative overnight financing credit may occur. This means that you will pay a small amount of interest to hold a short position overnight.

This example is a profitable trade. As in the previous example, a losing trade would incur the equivalent loss.

RISK & RISK MANAGEMENT

As with all investments, there are risks involved in trading on the financial markets. We’ve tried to explain the risks as clearly as possible on this website, with the aid of examples. There are ways of mitigating your risk, such as stop losses. If you need further clarification, turn to the ‘risk warning’ section of this website or speak to an Accendo Markets representative. Of course, trading leveraged products like CFDs can be very rewarding and different trading strategies can be employed to great effect, but careful risk management is essential. Don’t forget that, although profits can be magnified using leverage, so can losses.

STOP LOSSES

‘Cut your losses, run your profits’

A ‘stop-loss’ is a pre-set order to cut a position at a certain level, therefore restricting a loss. With a CFD account you have a choice between three types of stoploss; standard, trailing or guaranteed. However, you don’t have to use them. Some traders/investors have different trading strategies, and prefer not to.

  • A standard stop-loss: An automatic order to close your position at a level pre-determined by you. Can be subject to slippage.
  • A guaranteed stop-loss: A guaranteed automatic order to close your position at a level pre-determined by you. A small ‘limited risk premium’ is payable.
  • An automatic trailing stop-loss: An automatic order to close your position at a level pre-determined by you. The order level tracks the price of the underlying asset as it moves in your favour, locking in your profits. Can be subject to slippage.

In the scenario below, we use Vodafone (long);

Vodafone Entry Price                    174p

………………………………………………………………….

Stop-Loss                                         167p

If you bought Vodafone at 174, and spotted a strong area of price support (i.e. did not believe that the price was likely to fall Vodafone Entry Price 174p Stop-Loss 167p below this level) at 167, you might set a standard stop-loss at this level. Therefore, if the price falls to 167 (and trades at your order size at this level for an appropriate length of time), the system would automatically close the position for you.

 

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Just wanted to take a moment to compliment your team. The last couple of days have been a rollercoaster and continue to be so. In particular, John has been superb...… JK, London
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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4.81 Average

156 Reviews

George

I have found Accendo staff very helpful,,and informed. I have traded with you for some years now and have no regrets. Keep up the good work!

Posted 1 month ago

Shaun D

since signing up for Accendo I have had two traders, Mark and Sam. I have found both of these to be very informative about how CFD's work and they have made it very easy for me. Since working with Sam (last four months) my trading knowledge has improved and I can make more informative decisions about which Company's to invest with. Keep up the good work Sam.

Posted 4 months ago

Anonymous

I am very happy with the service I get from Accendo Markets and in particular Amrit Panesar. He is very professional and pleasant to speak to and this counts for a lot.

Posted 6 months ago

Shreekant P

Its a good site for dealing stocks worldwide and having good staff.

Posted 7 months ago

Nick W

Krishan Appiah is one of the most dedicated / informative broker I have ever had.

Posted 7 months ago

Thomas I

Since I have been trading with Accendo Markets I have experienced much greater success than has been my experience with other trading companies mainly due to the help given by, what I consider to be my terminal with the trading floor, Mark, who has been most helpful in reminding me of the progress of my positions throughout the day and keeping me in touch with those positions so that I can more easily make successful trades when appropriate instead of missing out on opportunities through lack of attention. He draws my attention to the situations and enables me to make profitable trades. I am very happy with the situation at the moment and am enjoying the experience. Thomas Irving.

Posted 8 months ago

Kartik A

Accendo markets keep me connected with the market and its very well followed by Mr. Krishan Appiah ,which helps me to take certain decision on time.

Posted 8 months ago

Peter p

I have been trading with Accendo Markets and James Abbott my account manager for coming on 5 years now, James Abbott the senior trader of Accendo Markets provides me with up to minute information when I need it and find him very easy and professional to deal with. Whenever I need to trade or am not sure about anything James is always their to help with any queries I may have. The Accendo Platform I find very easy to use and navigate although it has been slightly changed over the years but definitely for the better. Personal when I do trade 90% of the time, I rather telephone call to place my trade dealings and if James is not there to take my call I find others at Accendo like Sam, Lee take my trades and are. All in all everyone at Accendo Markets are amazing to deal with and my relationship with Accendo is just as I like it. Peter Petrou

Posted 1 year ago

Mrs. J

"Our Trader, Aymen Azizi, has been nothing but attentive to our every need throughout our long relationship with him. No issue is too small, full explanations on all our questions."

Posted 1 year ago

Brian R

I have been with Accendo for a long time now, ten or twelve year's, probably more . As I told Sam (my trader) I thought that CFDs were better than sex . I stopped trading for a few years and only started back about a couple of months ago. But it is as if I had never been gone , so to speak. Sam has helped me every step of the way, at my age one forgets things. I have only praise for Accendo and as far as I am concerned the platform is the best . Now I am back trading at 71 years of age, I might even try sex again. Brian Robertson.

Posted 1 year ago

Jim W

I understand how to make a profit with CFDs. I am restricted by the range of companies I have knowledge of. Although, I am not sure that is a big problem. Tom Robertson is a very fine man.

Posted 1 year ago

Rebekah S

Well, I would not be trading without the help of my trader, Sam Alnakkash. He provided a really great overview of Accendo Markets, an insight into trading in general and how to get started in trading online. His advice, support and training has been fantastic all along the way, enabling me to start trading earlier than I would have done had I not had the support. He has also been very adept at understanding me as a client in order to help me achieve my trading goals. I still have a lot to learn and hope I will get there.

Posted 1 year ago

Nick z

I like the updates on shares I trade. Updates from Bloomberg and Reuters plus industry updates and breaking news. I've had Matt Grice and James Abbott and found both to be excellent. I would like to continue a personal service with James. He understands how and which stocks I trade.

Posted 1 year ago

Steve O

Excellent, knowledgable broker interaction and communication, coupled with very good research and analysis.

Posted 1 year ago

William P

Being new to direct trading I needed help and was given all the time and advice that I needed to feel fully able to make decisions on what I wanted to invest in. I asked for and got exactly the type of info I required provided by Tom Cook, who I would recommend to anyone looking for help.

Posted 1 year ago

Mr. W

I have been dealing with accendo for the past 8 years my broker Amrit I find him very helpful when he is there lol and had many offers to change but will not do it Bill Roberts

Posted 1 year ago

Zoran N

Very good all round service! Timely market information. (charts + trends coverage ) On the ball accounts managers ,quickly available and alert . Part of my success owed to my personal manager Mr Sam Springet , than you.

Posted 1 year ago

Mr Brian C

Easy to deal with.....

Posted 1 year ago

Muhammed S

Accendo markets are great for trading cfds and their research is second to none! Aymen manages my account is extremely helpful and always keeps me updated on market info. Thanks again

Posted 1 year ago

Mr Buta B

Always available, whenever I call I get straight through to someone that can and will help. The staff are very knowledgeable, helpful and easy to talk to.

Posted 1 year ago

Stephen B

Aymen Azizi keeps an eye on what is happening in the market and informs me with timely relevancy, email call, and txt.

Posted 1 year ago

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