A CFD is a financial agreement between two trading partners to swap the difference between the opening and closing value of a contract. They can be traded without actual ownership of the underlying financial instrument in the market in which you are trading. In other words, it is a financial derivative.
Two of the key features and attractions of a CFD, for many investors, is the ability to use them to go short or long and to use leverage. Going short is selling against a backdrop of falling prices in the market. Thus, you can potentially profit whether prices are going up or going down. A CFD is traded using leverage; in other words traders typically pay a deposit or percentage of the total trade value.
As your position in the market is greater than your invested sum, you can potentially stand to profit more than you would without using leverage. It is important to be aware that leverage can also work against you, because losses are also potentially magnified by the use of leverage.
CFDs relate to, but do not entail, ownership of the underlying financial instruments in the market you are trading in. As a result, CFD traders do not have to pay stamp duty in the UK.*
Potential Risks of Trading CFDs
The use of leverage can be potentially risky, because both profits and losses can be magnified beyond the value of your initial deposit. If not monitored or stemmed at a manageable level, the falling value of your trades can result in serious losses.
CFDs, however, can be traded using risk management tools. Whether or not you think the market will fall or rise in value, you can start your trade with a guaranteed stop loss order. A guaranteed stop loss order acts as a safety net; it will stop your potential losses at a level predefined by you and beyond which you are not comfortable trading.
This means that you can calculate, in advance, the level of your losses at a point in the market. Whichever level you decide is a good place to terminate your position can be regulated using a guaranteed stop loss order.
As it is a financial derivatives product, which means you do not actually own the underlying financial instrument, you can use CFDs to trade a number of different markets. Some of the most common are the FTSE 100, the Dow, gold and crude oil.
There is a range of CFD trading companies like IG Markets however note that opening in account isn’t guaranteed. All applications are subject to terms and conditions.
CFD trading does carry a high degree of risk to your funds and can result in you losing more than your stake. It might not be appropriate for all investors. Before you start trading, make sure that you fully appreciate the risks that are involved. Only trade CFDs with capital that you can afford to lose. Where required seek independent financial advice.
* Tax law is subject to change or may differ if you pay tax in a jurisdiction other than the UK.
What is CFD Trading?
24-06-2010 by adminPre-approved Unsecured Credit Cards
13-11-2009 by admin
If you’re like everyone else, you’ve received a letter in the mail saying you’re ‘pre-approved for a credit card’ from the specified company. If you choose to open the sent envelope, the numbers of how much money you’ll be granted are large, but the rules and what you’re actually getting are small enough to miss. What does this mean to you?
An unsecured card is essentially for someone with good credit, who the credit card company trusts enough to pay off their debt on a monthly basis. Unsecured credit cards are held by a majority of people, and tend to be the most desired option. It allows for the user to make purchases and pay it back in monthly increments set by the credit card company.
Secured credit cards, on the other hand, are for those with unsteady, erratic and unsatisfactory credit, who have a history of late or not forthcoming payments. With a secured card, the credit card company requires the amount desired to be deposited before the card is issued. Upon receiving the deposit, your credit line is established for that amount. The deposit acts as a safety net, and if payments are not made, the company will take payment from your original deposit.
Unsecured cards do not require a deposit, and the consumer is allowed more freedom with spending and repayment. If the payments are on time, the limit allowed will be increased if desired. If, however, payments are not paid on time, credit card companies will continue to add additional late charges, as well as a certain amount of interest that also must be repaid. The interest varies, but can be as low as single digits and as high as 20% on your outstanding debt.
Pre-approved is another term used to lure in new credit card customers. Credit cards must always be applied for, and involved with this is a listing of the applicant’s occupation, income, other debt and similar factors. Once the application is submitted, the credit card supplier will examine the numbers and decide if you will be able and likely to repay your credit card purchases.
Pre-approved means the credit card company has obtained your credit score from a credit bureau such as Equifax and Transunion and already is aware of your good credit. You do still have to go through an application process, and the credit line advertised is not necessarily what you will get, but there is a better chance of being approved in this method than simply applying blindly for a credit card, in general.