Forex markets - trading internationally

The foreign exchange market is also known as the FX market, and the forex market. Trading that takes place between two counties with different forex is the foundation for the fx market and the background of the trading in this market. The forex market is over the top of thirty years old, established in the early 1970's. The forex market is 1 that is not based on any one business or investing in any one line of work, but the trading and selling of currencies.

The difference between the stock market and the forex market is the vast trading that occurs on the forex market. There is millions and millions that are traded every day on the forex market, almost two trillion dollars is traded regular. The number is much higher than the money traded on the daily stock market of any country. The forex market is one that involves governments, banks, financial institutions and the similar forms of institutions from other countries. The

What is traded, bought and sold on the forex market is something that can easily be liquidated, meaning it can be turned back to cash fast, or sometimes times it is actually happening to be cash. From one currency to another, the availability of cash in the forex market is something that can happen fast for any investor from any country.

The difference between the stock market and the forex market is that the forex market is global, worldwide. The stock market is something that takes place merely within a country. The stock market is based on businesses and products that are within a country, and the forex market takes that a step further to admit any country.

The stock market has set business hours. Generally, this is happening to follow the business day, and will be closed on banking holidays and weekends. The forex market is one that is open generally twenty four hours a day because the vast number of countries that are involved in forex trading, buying and selling are located in so a lot of different times zones. As one market is opening, other countries market is closing. This is the continual method of how the forex market trading occurs.

The stock market in any country is going to be based on simply that countries currency, say for instance the Japanese yen, and the Japanese stock market, or the United States stock market and the dollar. yet, in the forex market, you are involved with many forms of countries, and many foreign exchange. You will find references to a variety of forex, and this is a big difference between the stock market and the forex market.

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123cfd.com will teach you about CFDs on building and building a CFD Trading System.

FOREX (Foreign Exchange Market)

The foreign exchange market is also known as FX or it is also found to be referred to as the FOREX. All three of these have the same meaning, which is the trade of trading between contrary companies, banks, businesses, and governments that are located in different countries. The financial market is one that is forever changing leaving proceedings required to be completed through brokers, and banks. Many scams have been emerging in the FOREX business, as foreign companies and people are setting up on the web to take benefit of people who don't realize that foreign trade must take place by a broker or a company with direct participation involved in foreign exchanges. Cash, shares, and currency is traded through the foreign exchange markets. The FOREX market will be present and exist when one currency is traded for other. Consider about a trip you might get to a foreign country. Where are you going to be able to 'trade your income' for the value of the money that is in that other country? This is FOREX trading basis, and it is not in the open in all banks, and it is not available in all financial centers. FOREX is a specialized trading circumstance. Small business and people often times hunting to make big wealth, are the victims of scams when it comes to learning about FOREX and the foreign trade markets. As FOREX is seen as how to make a fast buck or two, people don't inquiry their participation in such an event, but if you are not investing income by a broker in the FOREX market, you should easy end up losing all that you have invested in the transaction. Scams to be wary of A FOREX scam is one that involves trading but will turn out to be a fraud; you have no chance of getting your wealth back once you have invested it. If you were to invest income with a company stating they are involved in FOREX trading you want read closely to learn if they are permitted to do line of work in your country. Many institutions are not permitted in the FOREX market, as they have defrauded investors before. In the last five years, with the help of the Web, FOREX trading and the awareness of FOREX trading has become all the rage. Banks are the figure one source for FOREX trading to take place, where a trained and licensed broker is going to complete transactions and requirements you set forth. Commissions are paid on the transaction and this is the usual. other type of scam that is prevalent in the FOREX markets is application that will improve you in generating trades, in learning about the foreign markets and in practicing so you can prepare you for keeping up with and generating trades. You want to be able to rely on a program or software that is truly going to make a difference. Confer With with your financial broker or your bank to find out more about FOREX trading, the FX markets and how you can avoid being the victim while investing in these markets. About the Author 123cfd.com will teach you about CFDs on building and building a CFD Trading System.

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CFDs or Margin Loans – Which one is better?

October 18, 2010 — 3:48 am

In the early days investors needing to borrow money to trade had few choices, either borrow money from your bank to purchase shares or call up your stockbroker and apply for a margin loan.

In 2003 traders and investors in Australia got a further choice, CFDs. Since their introduction the industry has changed, CFDs being a simple form of margin lending have grown to be the fastest growing derivative product in the country, outstripping the growth seen in the warrants market during the mid 1990’s.

No longer does a retail investor need to apply for a bank loan or deal with costly full service brokers. CFDs have revolutionized the financial services industry, retail investors can now open a Contract for difference account on-line in minutes and be up and trading before the conclusion of the day, executing all of their orders in real-time over the internet.

Unlike margin lending CFDs are usually traded over the internet with the investors portfolio being marked to market in real-time during the trading day, this is substantially different to the end of day portfolio revaluations employed by margin lenders. Real time portfolio margining means that traders can properly accurately manage risk during the trading day rather then needing to wait for statements to be created at the conclusion of the trading day.

Similar to equities bought using a margin loan CFDs also offer the holder the capability to receive a dividend, however in the majority of cases franking credits aren’t passed on to the holder of a Contract for difference unlike that of a margin loan. The main reason franking credits aren’t passed on when holding a CFD is because the purchaser of a CFD holds an over-the-counter derivative contract and not the real share. Not having the physical share whilst owning a CFD position also means that the owner of the CFD isn’t entitled to voting rights in the listed corporation over which the Contract for difference is based. Numerous CFD traders only hold their positions open for a short time frame and are not interested in voting rights or franking credits but instead have an interest in making a return from the short term price changes of the CFD.

One of the most significant advantages of Contracts for difference is that traders can always sell them as easily as they are able to buy them, this means is that going long is just as straightforward as going short allowing traders to gain in falling markets. With traditional margin lending short selling is tricky and near impossible.  

CFDs are comparatively cheap compared to margin lending, typical brokers offering margin lending will charge 0.50 percent whereas a normal CFD provider will charge 0.10 percent. One thing to be cautious of are the interest levels charged by margin lenders and CFD providers. It’s vital to note that margin lenders will charge interest only over the quantity borrowed whereas Contract for difference providers will charge interest on the full notional worth of the position, however, CFD financing charges tend to be lower. Financing rates are essential to take into account when comparing both products, however, this is less important for Contract for difference traders that only hold their positions for a short period of time.   

Typically Contracts for difference offer traders extra leverage than regular margin loans enabling traders to obtain a superior return on their investment. You ought to also be aware that higher leverage also can lead to a rise in risk, this is normal with leveraged products. The leverage offered for CFD buying and selling can be as much as 100 times while margin lenders will normally only offer around 10 times leverage or less. The leverage obtainable will vary between each CFD provider and margin lender. Leverage is often determined on a stock by stock basis taking into account the market capitalization of the stock and liquidity.  

As Contracts for difference are an over-the-counter derivative product it is important to note that you do not own the underlying share or instrument over which the CFD is quoted, this also means that you are not able to transfer your position to a different Contract for difference broker or stock broker, you can only deal with the Contract for difference provider that you opened the position with. Whenever you buy stocks on a margin loan the equities are held in your name this means that you can always move them without restraint from one stock broker to another. 

CFDs suit short to medium term active traders seeking to exploit market movements in both directions, however, margin lending is much better suited to people who are looking long-term investment options and wish to take advantage of the income tax benefits franking credits provide, as well as voting rights. It’s always essential to keep in mind that both products are leveraged, you must make sure that you adopt a suitable money management plan and never utilize the leverage offered to its full capacity.

Trading Margined Products

Oct 22nd, 2010 by Master

A CFD or Contracts for difference is an tool that allows speculators to speculate on the direction of stocks or indices without having full ownership of the underlying contract.

Make sure you use the right strategies when dealing with Contracts for difference. It stands for CFDs investing. Pair trading is the most common trading technique. Even though gains are not guaranteed with pair trading the risk is noticeably lower. This technique is an arbitrage technique, which means balancing a long deal versus a short deal. Pair investing allows investors to diversify the risk. By pair trading, a trader can diminish the exposure.

It is a contract defined as an agreement to an exchange of a difference between the opening and the closing price of a financial mechanism of a traded asset stocks, indices, and commodities online. It is a derivative mechanism from stocks, commodities, futures, forex, etc.. CFD trading offers a broad range of markets and it is very effortless to invest. It is very effortless to sell online shares, commodity futures, stock indices etc, similarly it is effortless to buy it. trading is really easy with CFDs and offer access to a wide range of products.

the shares, indices, commodity futures are investment instruments that allow you to access online price movements of shares, commodity futures or indices without actual possession of mentioned shares online, commodity futures or indices. CFDs on stocks, indices, commodity futures are perfect tools for hedging the value of assets, and also for a speculative trading with a high financial margin, and with forcible tools for an efficient and safe account administration!

As everything is done automatically it is extremely effortless to deal. Certain risks have to be assessed before you start trading cfds trading! The technology of trading is fully subordinate to its function that is to allow investors a valuable speculative and aggressive trading on a profit, with a high margin, with the possibility of using a safe money administration.

It also allows you to benefit from any market conditions providing you deal the right way. As you can go long and short it is easy to benefit from upward and downward market moves. sell a CFD on a share you do not own). Unlike traditional share investing one can go short and long with CFDs.

To investors, the trading on stocks and commodity futures allows a quality hedging of their assets, a valorization of a disposable capital and a risk administration.

Analyzing almost 10 million tweets, research finds public mood can predict Dow days in advance

October 19, 2010

Enlarge

A graph of Dow Jones Industrial Average values (center, blue) and tweets identified with a "calm" mood during a time series (bottom, red) running three days prior are overlaid in the top graph to show gray areas of significant overlap.

Measurements of the collective public mood derived from millions of tweets can predict the rise and fall of the Dow Jones Industrial Average up to a week in advance with an accuracy approaching 90 percent, Indiana University information scientists have found.

More information: The research paper is available for download here.Researchers at IU Bloomington's School of Informatics and Computing found the correlation between the value of the Dow Jones Industrial Average (

DJIA

) and public sentiment after analyzing more than 9.8 million tweets from 2.7 million users during 10 months in 2008.

Using two mood-tracking tools to analyze the text content of the large-scale collection of Twitter feeds, Associate Professor Johan Bollen and Ph.D. candidate Huina Mao were able to measure variations in public mood and then compare them to closing stock market values.

One tool, OpinionFinder, analyzed the tweets to provide a positive or negative daily time series of public mood. The second tool, 

Google

-Profile of Mood States (GPOMS), measured the mood of tweets in six dimensions: calm, alert, sure, vital, kind, and happy. Together, the two tools provided the researchers with seven public mood time series that could then be set against a similar daily time series of Dow Jones closing values.

The researchers then correlated the two sets of values -- Dow Jones and public mood -- and used a self-organizing network model to test a hypothesis that predicting stock market closing values could be improved by including public mood measurements.

"We were not interested in proposing an optimal Dow Jones prediction model, but rather to assess the effects of including public mood information on the accuracy of the baseline prediction model," Bollen said. "What we found was an accuracy of 87.6 percent in predicting the daily up and down changes in the closing values of the Dow Jones Industrial Average."

By implementing a prediction model called a Self-Organizing Fuzzy Neural Network (SOFFNN) similar to one already used to successfully forecast electrical load needs, the researchers were able to demonstrate that public mood had the ability to significantly improve the accuracy of the most basic models currently in use to predict Dow Jones closing values. Bollen described this particular SOFFNN as a five-layer hybrid neural network with the ability to self-organize its own neurons during a learning process that included information of past Dow Jones and public mood time series values.

"Given the performance increase for a relatively basic model such as the SOFNN, we are hopeful to find equal or better improvements for more sophisticated market models that may in fact include other information derived from news sources and a variety of relevant economic indicators," he said.

The researchers found the OpinionFinder positive/negative sentiment input had no effect on prediction accuracy, while the Calm and the Calm-Happy combination of the GPOMS had the highest prediction accuracy.

"In fact, the calmness index appears to be a good predictor of whether theDow Jones Industrial Average goes up or down between two and six days later," Bollen said.

The odds of the prediction accuracy rate of 87.6 percent being sheer chance were then calculated for a random period of 20 days and determined to be just 3.4 percent.

Provided by Indiana University (news : web)

GAIN Capital to Acquire the Retail Forex Business of Capital Market Services, LLC

NEW YORK and LONDON, Oct. 19 /PRNewswire/ -- GAIN Capital Holdings, Inc., a global provider of online trading services specializing in foreign exchange (forex or FX) and contracts for difference (CFDs), has reached an agreement to acquire the retail forex business of Capital Market Services LLC ("CMS Forex"), pending regulatory approvals and other closing conditions.

GAIN Capital, through its regulated subsidiaries, agreed to purchase the retail customer accounts currently held at CMS Forex's regulated subsidiaries in the United States, Bermuda, United Kingdom and Japan.   The transfer of CMS Forex's U.S. and Bermuda customers was completed on October 15, 2010.  The transfer of the retail customer accounts of CMS Forex's regulated subsidiaries in the United Kingdom and Japan is scheduled to be completed in the coming weeks, pending regulatory approval and other closing conditions.

The agreement comes as a result of CMS Forex's decision to cease providing retail forex trading services. CMS Forex will continue to offer FX liquidity services to institutional clients worldwide and act as an introducing broker of retail business to GAIN Capital.

"We are pleased to be in a position to offer CMS Forex's retail customers around the world the ability to continue trading forex with an established, well capitalized firm," said Glenn Stevens, CEO, GAIN Capital.  "Our goal is to provide these traders with uninterrupted service, and we will work closely with CMS Forex's team to ensure a smooth transition of their customer's accounts and assets to our retail division, FOREX.com.  We are confident that CMS Forex's customers will be satisfied with the robust offering available at FOREX.com, including our industry leading trading tools, research and educational resources, as well as our focus on providing superior customer service."

"When we made the strategic decision to exit the retail FX market, our major priority was to find our customers the opportunity to trade with a firm equally committed to providing superior technology offerings, educational resources and customer service," commented Eugene Hawkin, president and COO of CMS Forex.  "Having engaged in discussions with a number of firms, we felt that GAIN Capital would provide our customers with the quality of tools and services they have received during their time with CMS Forex."  

Read more

The Basics Of Day Trading

People all around the world seem to have a keen interest in the global financial markets. There is only a small group of people out there that trade everyday with trading instruments like junk bonds, spot Forex, CFDs or better known as contracts for difference. These are the your real day traders, they are at it tooth and nail everyday.

These people have a difficult job, they aren’t thinking about tomorrow they are under pressure to make daily profits. The shorter time frames make it tricky to buy and sell for maximum profit. They don’t want to hold positions overnight, so their entry points must be accurate. Talk about pressure.

The great thing about short-term trading is that, there are many markets to choose from, some people like stocks, commodities, and let’s not forget Forex. With Forex, you have a larger window to pick the times you want trade. You could have a day job then come home and trade the Asian session. Some people have a favorite currency pair, and trade it during a session where more participants are in is another option. Working in an online Forex trading room is another way to become a day trader, you can learn the ropes from others with more experience.

To be a successful FOREX day trader, however, there are a few things you need to keep in mind. For one thing, you must be conscious of unexpected news that is always leaking into the market, and you must learn to use tight stops. Accurate Forex signalsare a must when you are pushing yourself to trade within a limited time frame, as is the case with all day trading.

One great thing about getting started in trading is, you might want to turn this into a full-time profession. There are many people who start out, and suddenly realize that have a knack for this daily speculation. They really enjoy watching the price action throughout the day, and enjoy taking short-term profits out of the market on a daily time frame.

A key factor is most of the crowd wont succeed at this, and its not because the markets against them. Its just simply they don’t have enough experience, and the right information. You simple have to be good to win at this period. Remember you’re not in your trades for weeks or months, you don’t care about all the hills and valleys the markets produce over time. The last thing you want to do is hold a position overnight. You are a focused day trader and you want your profit today, not tomorrow. Spot Forex is very popular for this kind of action, lots of volume and plenty of currency pairs to trade, if you pick this career the opportunities and rewards are very rewarding to the knowledgeable trader.

Looking to find the best advice on secrets of Forex trading hop aboard.

FOREX Trading with CFDs

There is lots of knowledge and interest out there about FOREX trading. FOREX (Foreign Exchange) is simply purchasing a currency at one price and selling it at another price to make a profit. Currency markets are well known around the world, and your average Joe will have exposure to them when you go travelling to Europe or Asia as you will need to change your currency to be able to purchase things in the new country. You also may have exposure to foreign exchange markets if you ever made a purchase from overseas and had to calculate what the cost of the product was in your local currency.

There are many providers out there that let you trade FOREX with CFDs. You can simply open an account and say you want to purchase x amount of dollars and sell x amount of Euros and hey presto, it all happens automatically.

Contracts for difference (CFDs) work as a form of financial derivative that creates a contract between two parties that states that one party will have to pay the other the difference in the value of the underlying asset that the contract was made on.

What this means is that you can make a contract saying you will buy the USD at $1.10 Canadian Dollars, and if it is higher than that (say $1.20 Canadian Dollars) at the time you decide to sell it, the other party will have to pay you the difference, but if it is lower (say $1.00) you will have to pay them the difference. This is basically the same as trading the currency its self.

FOREX trading accounts will also allow you to purchase on leverage (borrow to make bigger purchases than the actual amount of cash you have). CFD accounts also let you do this.

As you can see, CFD accounts allow you to do almost everything that a standard FOREX account could do, but they also offer so much more. Like the ability to trade shares in almost any market, the ability to trade indices, commodities and many other different options.

So I ask you, why would you trade FOREX when you could trade CFDs?

Article Source: http://www.ArticleBlast.com

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Read more about contracts for difference, CFD Trading System and Online CFD Trading

Managing Risk When Trading In CFDs

CFDs or a contract for difference is a trading toll that you can use to trade forex. It works on the principle of leverage. Leverage is the most significant reason as to why forex is risky or why people say it is so. Leverage allows you to deal in a trade with only a percentage of the amount. So if the trade deal is for $1000, you can get into the deal for around $200. Although this is beneficial as it allows you to get into big deals with small amounts, you always have to be on your toes when dealing with leverage and CFDs. The leverage factor alone is not dangerous as it in a way amplifies your loss. However, people have many misconceptions about the entire concept and they make wrong calculations leading to losses.

The Risk With Leverage

Leverage in no way means that if you invest some money, you will lose more than you invest. All it does is allow you to deal with larger sums of money that would otherwise have been out of your reach. The risk comes in when people begin to think that with leverage, they will get rich overnight or will suddenly make big bucks on a small amount. This makes people pump in more money than they should and puts them at a risk. The other risk with leveraged products is that a small price increase will result in large profits as you are dealing with a large number of CFDs, but a decrease will also mean huge losses.

How To Avoid Risk

When you trade CFDs, you have the advantage of using stop losses. Understand how they work and how they will help you so that you can put them to good use. With a stop loss, you can set a point up to which if the exchange rate falls when you will automatically withdraw without further delay. If the rate goes up, you can use the advantage of the trailing stop loss to take your previous stop loss point up in relation to the new rate. This will help you minimize losses and decide what your losses can be beforehand.

Do not go running around looking for a gold mine, this is a gradual investment and will take time to bear fruit. So, have patience and do not keep switching mindlessly. Also, do not chase the lowest margins possible, the greater the leverage, the higher the percentage of loss.

If you have to switch your forex, trade in small CFD deals and get an idea of the new investment instead of plunging in blindly. Risks sometimes payoff but take only calculated risks. Study the market and all possible sources before going into a new deal, this will give you a good idea of its worth.

Like in speculations, never trade with the money that you need to live on or your savings. This one risk is always dangerous.

Develop a CFD trading method, when you deal with CFDs, you should have a proper method of investing that will minimize any risk to a great degree. 

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Mercedes Kent - About the Author:
To find all the other information regarding dealing with CFDs and foreign exchange, visit www.igmarkets.co.nz, they can guide and help you to make the right CFD investments

Cfd Trading Australia- Find a Cfd Broker

As the name suggests, Contracts for difference (CFD) is an agreement entered upon by two parties, whereby they decide to exchange the difference between the opening price and the closing price of a stock. Contracts for difference (or CFDs as they are sometimes referred to) mirror the performance of a share or an index. Contracts for difference (CFDs) can be traded on equities (shares), index trades, FOREX and commodities. Contracts for difference allow investors to take long or short positions, and unlike futures contracts have no fixed expiry date, standardised contract or contract size. Contracts for difference are traded on margin, and the profit/loss is determined by the difference between the buy and the sell price. Contracts for difference (CFDs) are instruments that offer exposure to the markets at a small percentage of the cost of owning the actual share. Contracts for difference provide an excellent vehicle for short term trading strategies and are the preferred vehicle amongst hedge funds and professional traders. You should be aware, there are two different types of contracts for difference providers, one is more like a traditional spread better where you are trading with the CFD provider and have to trade on their prices. With the other provider, your contracts for difference orders or more strictly the hedge for your CFD orders is sent directly to the LSE order book. 
 
WHY CFD’s
 
CFD trading is growing in popularity increasingly quickly, asretail investors recognise their benefits. CFDs use the power of leverage to trade which is one of the key reason they are such a powerful tool. CFDs give the owner the benefits of share ownership without physical ownership of the underlying security. Contracts for Difference are strictly for the active trader, someone who is skilled enough to use the flexibility and agility these holdings offer. CFD’s are traded in a similar way to ordinary shares. CFD brokers are now mostly online and use electronic platforms, which makes the trading routine a lot faster. CFDs can also be used for hedging and so can also reduce overall portfolio risk. CFDs can be used for short selling, Margin Lending does not allow this. CFDs tend to carry a lower interest rate component than Margin Lending. CFDs are short term trading instruments while Margin Lending is more for medium to long term investment strategies. 
 
CFD BROKERS
 
CFD brokers are now mostly online and use electronic platforms, which makes the trading routine a lot faster. If you already know about CFD, you might be interested in finding CFD Brokers near you. Some brokers, use real prices with no hidden charges added to the bid/offer spread, and fees are levied separately. Others claim to offer commission-free trades, but the cost is usually factored into the spread.  To find the best broker feel free to visit our website at CFD FX REPORT or email support@cfdfxreport.com

Trading Cfds: A New Dawn In The Financial Markets

A derivative product, Contract for difference (CFD), allows traders to profit from changes in the price of stocks, shares, commodities and forex trading. A Forex trading Contract for Difference or a Forex trading CFD works as a contract between two entities, in which the seller will agree to pay the difference between the current value of a currency and the value of the currency at a future date to the buyer. And in this transaction, the seller profits from a decline in the value of the currency.

CFDs are generally off-exchange financial instruments and are traded at a fraction of the cost of traditional stock trading. CFD traders do not take delivery of the instrument and settle the difference between the purchase price and sale price, on which the trader either makes a profit or a loss. CFDs are a new and efficient way to trade shares, equity indices, commodities and foreign exchange.

For trading in CFDs, you do not need to pay for the full value of the positing you have picked up, rather you may put up a margin from just 5 per cent of your position, resulting in trades up to 20 times your initial capital. This fantastic leverage has made CFD day trading one of the most popular investment strategies.

Geared financial instruments such as CFDs allow traders to make the most effective use of their investment capital. However, it is important to understand that the amount the trader could lose relative to the initial investment is much greater than in the case of non-geared instruments. CFDs also provide traders with an extremely wide range of products to invest in, who can easily start dealing across a large cross - section of the market.

CFDs bring with them a few unprecedented benefits over conventional trading: -

* Very low margin requirements
* Immediate execution on transparent prices
* Ability to go long and short
* Puts up a fraction of full contract value
* No stamp duties

Forex trading CFDs gives a whole new dimension to financial markets as it builds on the inherent advantages of CFDs. Contracts for Difference were designed to allow traders to rake in the benefits of owning a share / commodity without physically possessing it. A forex trading CFD is advantageous over conventional trading as the price at which a forex trading CFD is purchased is the base price and hence a CFD trader need not worry about the least of the maximum value of the currency pair in question. Rather, the trader is impacted by the fact whether the price of a currency is above or below the contract price.

Also, for forex trading, the trader need not invest in full to purchase the currency. He will usually pay a margin of the real price, and the profits in this type of CFD trading are comparable to other forms of currency trading. Very often, you may witness leverage options as high as 500:1 which results in the trader being able to invest in a very high number of units.

Article Source: http://www.articlesnatch.com

CFD Trading Systems

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CFD TRADING SYSTEMS EXPLAINED

CFD Trading Systems are the bread and butter of any successful contracts for difference trader. There are many kinds of trading systems available to a trader to select from. There are systems for the beginner trader and systems for the advanced trade, Mechanical and discretionary systems. CFD Trading systems for stocks, currencies, commodities, indexes and any combination of the above.

A trading system is a set of rules that govern how a trader will conduct his trading. They can go into the most minute level of detail but generally include:

Read more... 

An article from http://www.cfdtradingsystemhq.com a site on building a CFD Trading System

CFD Terminology - Understanding Contracts for Difference

There is lots of different terminology that a trader of contracts for difference must understand if they are going to get their head around all the information out there in the contracts for different world.

Whether you are looking for a broker, developing trading strategies, or self educating, understanding the terminology (just like in lots of other disciplines) is the first step.

Here is some of the common terminology that is used in the contract for difference world:

Blue chip stock: A company that is regarded as traditional and not technical. Large, profitable and conservatively managed organizations. Well established company.

Contract for difference: Contract for difference. A contract between two parties, buyer and seller, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time. An over the counter derivative similar to a future, in that CFDs are liquid derivative instruments that mirror the underlying assets in all aspects, and can therefore be traded by closing out and re-opening at any time before the expiry date, at the prevailing market rate. CFDs reduce traders capital investment amount required, while increasing profit potential. See CFD Overview for a detailed description.

Gearing: Also known as leverage. The ratio of a company's long-term funds with fixed interest to its total capital. A high gearing is *generally considered very speculative.

Hedging: The practice of undertaking one investment activity in order to protect against loss in another, e.g. selling short to nullify a previous purchase, or buying long to offset a previous short sale. While hedges reduce potential losses, they also tend to reduce potential profits.

Limit orders: Instructions do deal that stipulate the minimum or maximum price at which you want to buy or sell your shares.

Short: 'Short selling' or a 'short position' is placing a trade if a trader thinks the market price will fall. Originally from thee act of selling a security that is not owned and hence, creating a short position. An investor who goes short borrows the security from their broker to sell and then rebuys the security at a later date and a lower price. The difference is the investor's profit.

Over the Counter: Over the Counter (OTC) represents a market in which security transactions are conducted through a telephone and computer network-connecting dealers in stocks and bonds, rather than on the floor of an Exchange.

Synthetic Market: A Synthetic Market is a market created by your CFD Broker. Prices are guided by the underlying assets but the spread can be slightly different (as per the pricing policies of your broker). In a Synthetic market, all transactions happen between the CFD broker and the Trader.

To read more on contracts for difference check out CFD Trading System or for details on To read more on contracts for difference check out Online CFD Trading

Beyond Gold Trading… E-Micro Gold Contracts (GLD, IAU, PHYS, CME) Read more: Beyond Gold Trading… E-Micro Gold Contracts (GLD, IAU, PHYS, CME) - 24/7

Exchange traded funds cover almost every strategy that the retail investor can imagine.  If you can’t find an ETF, there may be a futures contract out there to trade an instrument.  As if the myriad of gold ETF instruments that allow investors to get direct price exposure to gold were not enough, now there is a mini or micro futures contract for investors.  Retail investors generally trade gold in ETF products like the SPDR Gold Shares (NYSE: GLD), the iShares COMEX Gold Trust (NYSE: IAU), or even via the ETFS Physical Swiss Gold Shares (NYSE: SGOL).  Just this week we noted how much of a critical mass these have reached and by some counts the physical (and representative) gold ETFs are probably now close to a combined $60 billion in bullion assets.  The SPDR Gold Shares currently holds more gold reserves than both China and Switzerland and it would come in as the sixth largest central bank holder of gold if it was a government entity.

Read more: Beyond Gold Trading… E-Micro Gold Contracts (GLD, IAU, PHYS, CME) - 24/7 Wall St. http://247wallst.com/2010/10/06/beyond-gold-trading-e-micro-gold-contracts-gld-iau-phys-cme/#ixzz11brK2Two

Contracts for Difference (CFDs) Vs Futures

Contracts for Difference and Futures are both forms of financial derivatives. A financial derivative is an instrument whose value is derived from the underlying asset. In the case of CFDs and futures, the underlying asset may be a stock, bond, commodity or more. But the most common underlying asset for both CFDs and Futures is shares. There are three core differences between futures and CFDs. Liquidity, expiry dates and financing.

Liquidity is a standard issue for basically all futures exchanges except for the giant that is OneChicargo - the largest futures exchange in the world. Futures markets have become famous for slipped trade executions (slippage) and bad execution. This is because of the lack of volume associated with the trades. As futures are exchange traded products there is sometimes no counter party to execute the trade at the appropriate level, causing sporadic movements in the price of the future.

CFDs however have almost infinite liquidity because they are (mostly) not an exchange traded product. You are guaranteed to complete your opening order at the price you requested and that was displayed by your broker. While there is some slipped trade executions, this is usually due to synthetic price determination, not lack of liquidity.

Expiry Dates are another big difference CFDs have to futures. Expiry dates exist on futures because in the traditional sense, this is the date that the asset has to be delivered and the agreed price. Since most futures contracts are closed out before the expiry date occurs, the asset doesn't physically get delivered but technically there is still one in place. This supports the financial markets and allows people who actually want to own the share (or other asset) the ability to obtain it.

Finally, financing is another differentiator between futures and CFDs. They are both leveraged products where there is a borrowing element involved in the purchase and interest is either paid or earned but CFDs are more like purchasing a share with a loan from the bank while futures have their leveraged components priced into the asset.

Vincent Parker is the author of 123CFD a resource on Contracts for Difference (CFD) Trading

This article was Contracts for Difference (CFDs) vs Futures

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Contracts for Difference (CFDs) Explained

Contracts for Difference (CFDs) can be quite confusing. Here is a quick article explaining CFDs, leaving Contracts for Difference explained once and for all.

Contracts for difference are a contract created between two different parties, stating that one party will pay the other party the difference in the value of that contract at a point in time in the future. One party will expect to receive money if the value of the contract is higher, while the other will expect to receive money if the value is lower.

In the real world, the contract is created between a trader and a CFD broker. The contracts are open ended, unlike a future contract meaning that its up to the trader to decide when to close the trade and collect (or pay) his money. From this sense, CFDs work much like a share trade.

Contracts for difference are usually traded on leverage, meaning you only need a small portion of the trade funds to execute the trade. For instance, if you were to open a position of $10,000 and the margin was 10% you would only need $1000 to open the position. This means that much larger profits can be achieved with smaller amounts of money.

The fact that you take a position out on leverage, means that there is an interest element associated with your purchase. And you will find yourself paying and an annual interest rate a few percentage points higher than the official cash rate.

Another great thing about CFDs is that it's very easy to open a short position. What this means is that you can actually trade on the value of a CFD going down instead of up. Something that was very difficult until this tool was created.

A CFD is priced based on the value of the underlying asset. The underlying asset could be a share, currency, commodity or indices in many markets. The flexibility of the different types of assets you can trade with CFDs is unparalleled by anything else. Which is why if you are looking to get into short term trading, anything from spread betting, FOREX trading or day trading, CFDs are your best option.

Vincent Parker is the author of 123CFD a resource on contracts for difference - CFDs.

123CFD is a free online community for all Contracts for Difference (CFDs) Traders. We cover Contract for Difference (CFD) Trading, Spread Betting, Strategies and Techniques. We aim to have the most comprehensive source of information for things related to Contracts for Difference. Check out the CFD Overview page for a full introduction into the history, workings and fundamentals of CFDs.

Article Source: http://EzineArticles.com/?expert=Vincent_B_Parker

ETX joins the iTrade party with new app

Monday, 4th October 2010

As mobile dealing improves, trading will speed up

Juliet Samuel

SPREAD betting and contracts for difference (CFD) provider ETX Capital this week joined its peers in bringing out a customised iPhone app to let traders alter their positions on the go. ETX now joins IG Markets, City Index and GFT as one of many brokers with an iPhone-specific trading platform. And, judging by the others’ experiences, the app will soon jumpstart its mobile trading.

City Index launched its app nearly two years ago and today, 25 per cent of its clients places at least one trade via a mobile each week, with 15 per cent of total trades placed through phones. And with 90 per cent of City’s mobile trades involving an iPhone, its app was essential in expanding the market. Read full article...

Why CFD Trading Is So Popular? Helpful Things To Keep In Mind

Needless to say that CFD trading has gained a colossal reputation recently. As you understand, this means that this kind of trading provides a lot of great advantages. As for me one, one of the key pluses is that only a small upfront amount of money is required. The other essential aspect to mention is the ability to pick the levels of leverage. In other words it means that traders can pick how much of risk they are ready to take.

The truth is that at the moment it looks like CFD trading is getting even more popular. As a result, a growing number of investors prefer CFDs rather than traditional stock brokers and paper shares. To go into more details, it should be added that if you pick CFDs you will not have to wait to collect dividends, a dividend credit will be received almost at once after the position closes.

The other important point that makes Contracts for Difference so popular is the absence of taxes to be paid. It is essential to realize that this could automatically increase ones’ dividends by about 0.05% and if you think in large terms, there is no need to mention that this is a significant gain in itself. You might want to ask – Why there is no tax stamp on CFD trading. The main reason for this is that there is no actual product or share trading hands.

You need also to keep in mind that the investors can choose long or short positions, which can be placed on commodity, index or on the underlying share.

Besides, there is one more reason that makes folks prefer CFD trading, I am talking here about the possibility to use very large margin ranges. Simply speaking when a trader uses leverage, and he/ she wants to create a very large position, the amount of moneys upfront to open the account is really smallest. CFD traders, who wish to hedge, can utilize this leverage and margin trading even for one percent.

To conclude it should be pointed out that before dealing with CFDs, investors should be aware of an appropriate terminology. Keep in mind that it is really vital to devote some time in order to completely understand and learn the fundamentals of CFDs, positions, leverages and margins. Don’t forget that it is suggested to start out small and fund your trading account with the amount of money you can lose. It is better to be safe until you become a specialist and find a strategy that works for you flawlessly.

If you are in search of more information about CFDs, visit this site.

Singapore Stock Exchange- the Financial Hub- Great Trading

What is the Singapore Stock Exchange (SGX?)

 The SGX is Asia-Pacific’s first demutualised and integrated securities and derivatives exchange. The SGX was inaugurated on 1 December 1999, following the merger of two established and well-respected financial institutions – the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX).

On 23 November 2000, SGX became the first exchange in Asia-Pacific to be listed via a public offer and a private placement. Listed on our own bourse, the SGX stock is a component of benchmark indices such as the MSCI Singapore Free Index and the Straits Times Index.

Home to Singapore’s leading listed companies, SGX is also at the forefront of exchanges globally in attracting international issuers and is rapidly emerging as Asia’s offshore risk management centre for international derivatives.

Which is making some Singapore companies look very attractive for overseas investments, which gives them a positive outlook for the future.

TRADING OPPORTUNITIES

It is reported that Singapore trades the 5th largest amount of Forex every day, for such small population this demonstrates the money in singapore. Which has seen a new wave of educational companies and Forex Companies opening up across Singapore, so who is highly recommended FOREX BROKERS  the CFD FX REPORT recently looked at these brokers, so feel free to contact them if you are looking for a broker and they maybe able to point you in the right direction, email support@cfdfxreport.com

The Stock Market is now seeing a wave of CFD (contracts for difference) traders and brokers in Singapore. With the recent downturn in the global and local markets, the CFD traders have been doing quiet well as they have the ease of being able to go short using CFDs.

So who is the best CFD PROVIDERS in Singapore.the CFD FX REPORT recently looked at these brokers, so feel free to contact them if you are looking for a broker and they maybe able to point you in the right direction, email support@cfdfxreport.com

So it maybe just the time to start to look at trading in Singapore, or from Singapore.

Happy Trading!

CFD FX REPORTis a real time tool for clients with an interest in the trading of stocks, indices and commodities globally.CFDs (Contracts For Differences) are one of the worlds’ fastest growing trading instruments that allows clients to profit from a rising and falling market. The CFD FX Report is a company comprising of expert traders that analyse the market daily and are able to make recommendations for the following day trades based on this analysis. The CFD FX Report is released everyday at 6.30 p.m. (Singapore time) for review by the clients for the next trading day.

Cfd Trading- 8 Trading Tips to Make Investing Successful

If you want to succeed in Contracts for Difference Trading (CFD), you need to experience what your doing and do it right. This is not like going up on a bike and starting to cycle. It’s more like get in the driver’s seat of a motorcar with an teacher at her side, help them understand the rules of the road while moving safely through the traffic. successful traders live by the ‘road rules and avoid heading in the wrong way for access to the examples of the past, sometimes yes, sometimes more.

When you get a chance to go to a seminar where the success of CFD FX REPORT traders are talking about, jump on the opportunity to learn all the details on what led to their succeeder. Meanwhile, follow these guidelines to get the engine and mind into the busy road of exchange operations.

1. Advice. In That Respect are thousands of people who have gone before and not so much the succeeder or seen a amount of both. Read books, collect information, the formation of free trial. The more you know and understand about the foreign exchange, the better their potential for success.

2. Not enticed to trade more than they can afford. CFD is dangerous and even the most seen brokers and traders may have unforeseen losses. The main trouble is not going beyond their means and then risk turning a loss the money needed for life, either now or in the future.

3. It is not used outsmart the market. Interpreting and forecasting of trends in the movement is something that even the professionals and had to spend years, if not decades, fathoming. Always sell to markets that are not performing and which are signs of weakness. Trying to be intuitive and make rash predictions only lose money.

4. I understand that in world is just a game. It may seem like a wrong comment, but it is necessary to obtain results that are not too serious. Considering that the next one million dollars because the man has only one triumph, and feelings can lead to more skills that you become the next Pedro Pinch cent. Have the high and low trying to avoid.

5. Draft victory away. Whatever happens in the short term must be good for the long term. Low may help you understand where it has failed, while high can help you determine what to duplicate next season. Trading in the  CFD market, you will see a multitude of changes in the market on a daily basis. What really matters is the long-term results. You must keep Chipping away from them and reinvesting its “champion” toward greater succeeder.

6. Ending loss positions. Not continually throw money into a hard trade is expected to improve. Probably not. experience out while you can. Are you sure you lose money, but the loss of “some” is better than losing everything.

7. Be controlled. When you finish your homework, stick to your system. Do not try to outdo yourself for being cocky and throwing more money into the market and just watch closely.

8. Keep a cool brain during services. Before making a transaction, you use and the assessment to decide what to do.

When trading begins, it may be attractive to include the flow of adrenaline and do more than what was planned. Stick to the plan and avoid trying to do under pressure. If you participate in exchange operations and see that it is not for you, but persevere is keep awake at night. Market volatility in foreign exchange trading can be so intense that it could send a dizzying. Note that There are other forms of trade that is not so involving her immediate attention.

Now that you have the rules you will need to find a great broker so feel free to contact us for the CFD FX REPORT or email us at support@cfdfxreport.com

CFD FX Report www.cfdfxreport.com is a real time tool for clients with an interest in the trading of stocks, indices and commodities globally.CFDs (Contracts For Differences) are one of the worlds’ fastest growing trading instruments that allows clients to profit from a rising and falling market. The CFD FX Report is a company comprising of expert traders that analyse the market daily and are able to make recommendations for the following day trades based on this analysis. The CFD FX Report is released everyday at 6.30 p.m. (Singapore time) for review by the clients for the next trading day.

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IG Markets Scoops More Prestigious CFD and Forex Trading Awards

(PRWEB) September 25, 2010

CFD and Forex trading company, IG Markets, has won a Falcon Award in the 2010 FX Traders’ Choice Awards and has again been recommended for both CFDs and Forex in the AFR Smart Investor Blue Ribbon Awards.

Key Facts:

    IG Markets a ‘Falcon’ award winner for highest broker satisfaction in Oceania at FX Traders’ Choice Awards.
    IG Markets earns ‘recommended’ titles for both CFDs and Forex in AFR Smart Investor Awards, 3rd year in a row.
    Awards a vote of confidence from the wider CFD and Forex trading public.
IG Markets has been named as one of the 10 retail FX providers honoured from a pool of almost 90 in the 2010 FX Traders’ Choice Awards. Nominated by more than a thousand traders over 111 countries, they won the prominent Falcon Award for High Broker Satisfaction in Oceania. The awards are run by International Business Times, a leading global financial online newspaper published in 14 countries and Forex Datasource, a leader in retail FX market research and FX broker sentiment analysis.

AFR Smart Investor magazine’s Blue Ribbon Awards recognise top performers in the banking, investment and insurance sectors. For the third year in a row, IG Markets has been named a ‘recommended’ provider for both CFD and Forex trading. Judges based their recommendations on range of product offerings, risk management options, varied contract sizes and trading platform.

The recognition for both of these awards acknowledges IG Markets’ product appeal to investors, traders and clients. “IG Markets has always had a strong focus on clients, and we do the research to meet their existing and changing needs. Being recognised in both of these prestigious awards is a great achievement and we’ll be doing everything we can to win the awards next year and beyond. There’s no room for complacency. We aim for excellence in pricing and other aspects of the business that our clients value most,” said Mr Tamas Szabo, IG Markets Australia Chief Executive Officer.

Industry Recognition

The year has been one of major achievements for IG Markets. Along with the 2010 FX Traders’ Choice and Smart Investor awards, they have scooped other top CFD trading awards, including Best CFD Provider for 2010 by Money magazine, CANSTAR CANNEX Five Star Rating for Outstanding Value CFD Provider and Best CFD Provider and a Finalist in Best Forex provider in the 2010 Stockies awards. Amongst its research, Investment Trends also recognises IG Markets as Australia’s number one CFD provider*.

About IG Markets

IG Markets specialises in financial derivatives, principally Contracts for Difference (CFDs) on over 7,000 global share CFDs, along with indices, forex trading, commodities, options, binaries and more. IG Markets is part of the IG Group, a UK FTSE 250 member with over 75,000 active clients worldwide. For further information please call 1800 601 799.

*29% of CFD traders choose IG Markets as their main provider vs. 20% for the next largest provider – Investment Trends May 2010 CFD Report.

Trading CFDs may not be suitable for everyone so please ensure you understand the risks involved. Please consider IG Markets’ PDS before entering into any transaction.

What Are Contracts For Difference (cfds)?

Contracts for Difference are a financial derivative – relatively new compared to other financial tools. The specific type of instrument is a derivative. Other financial derivatives include options, warrants and futures. A derivative is a tool that is taken from a valuable piece of property such as currency, bonds and stock. There is an agreement taken out against that asset between two different parties with an arrangement that one side pays the other the difference in price of that asset from time of purchase to time of sale.

CFDs are an arrangement taken between two sides, to pay the difference in the price of an asset from the time one purchases it to the time one sells it. The difference between the cost of the asset will be determined by changes in value from the original market.

CFDs are unique as a financial instrument as they can be created against any type of tradable financial asset. This includes currencies, bonds, commodities, energy, indices, stocks, property etc... It’s easy because it’s just the creation of a contract between two parties to pay the difference in the original value from the time you acquire it to the time you sell the contract. You don’t even need to own the asset.

CFDs can be created in both short and long positions. A short position is where the purchaser would have to pay if the price goes up and the seller pays if the price goes down. A long position is a position where the purchaser thinks that the value will go up. If the value goes up from the point of purchase, the person who sold the contract will have to pay the purchaser the difference in the price of the contract. The value of the contract is reflected directly by the price of the asset. If the price of the asset goes down, the individual who bought the contract would have to pay the person selling the difference in the price.

Contracts for difference are usually traded on a market run by single company, known as the market maker. They are not usually run where each contract is made between two different individuals. The market maker is the entity who facilitates the other end of the purchase. A trader is usually purchasing and selling to a single entity. Market makers earn a living by profiting off trades that go the wrong way, by charging on trades and by creating a spread on the CFD. The spread is the difference between the purchase price and selling price of the Contract for Difference. These entities also make money by charging investors interest.

CFDs are usually purchased on a margin. An example would be if you purchase $10000 worth of contracts, you would only pay $500 in cash, and borrow $9500 from the entity. The market maker will then charge you interest on long positions and pay interest on short positions. The cost is usually quite small, with you paying an extra 2-3% on the official cash rate for long positions and you receiving the official cash rate minus 2-3% for short positions.

The great part about having a margin is that you can take out larger positions than you have the immediate cash for as you only need 5% (depends on the market maker) of the actual value of the trade to create the contract. The risk is that if the trade doesn’t go as predicted, the costs can be very large.

By: Vincent Z Parker

Article Directory: http://www.articledashboard.com

123CFD is an educational site explaining contracts for difference (CFDs).

ASX derivatives trading surges in August

Alison Bell

September 6, 2010

Derivatives trading on the local bourse jumped by at least nine per cent in August, but share trading volumes are still lacklustre compared to a year ago.

The Australian Securities Exchange Group (ASX) confirmed what industry researcher Investment Trends said in August - contracts-for-difference (CFD) trading has taken off in Australia.

ASX, which will lose its two-decade monopoly on securities trading later this year, reported a nine per cent rise in the total notional value of all CFD trades to $371.6 million in August, during which 16.3 million contracts were traded.

CFDs comprise a leveraged bet on future changes in the market price of a particular asset and are considered a niche online trading market that attracts self-directed investors.

ASX operates the only listed CFD market in Australia.

Its August results mirror Investment Trends' online survey in May of 9,644 local investors using a growing number of CFD issuers to trade the high-risk, leveraged derivatives over-the-counter.

Trader numbers in Australia grew 22 per cent to 39,000 over the year to June, but were still only six per cent of the online trading market comprising 650,000 people, the researcher said in August. Read on.

Former Macquarie manager pleads guilty

Former Macquarie Bank portfolio manager, Oswyn de Silva has pleaded guilty to insider trading charges brought by the Australian Securities and Investments Commission (ASIC).

The regulator announced this week that de Silva had pleaded guilty in the Sydney Central Local Court to insider trading on 12 occasions in contravention of the Corporations Act.

ASIC had alleged that between 20 December, 2006 and 26 April, 2007 de Silva, while employed as a portfolio manager and associated director of Macquarie Investment Management acquired shares and contracts for difference in respect of a number of companies on the Singapore Exchange while in possession of inside information. Read full article

Contracts for Difference – Futures & Foreign Exchange – Leveraged instruments Explained

What is a CFD A CFD is a leveraged trading instrument that allows you to trade a large numbers of shares for a smaller outlay than buying the actual stock or contract. In doing so your gains OR losses can be magnified compared to holding ‘traditional’ positions. You can trade LONG [UP] or short [DOWN- selling something and buying it back for less in the future].

Lets look at an example of trading stock ZYX….We will buy 1000 shares of ZYX at a value of $10

To purchase the real thing will cost us $10000, plus commission at around .4%.

To purchase 1000 CFDs of the same stock will only cost us $500 in ‘margin’- which we get back at the end of the trade IF we are right, Plus commission at around 1%.

This means that our R.O.I. [return on investment] is amplified much more when trading a CFD- and a WARNING- our losses can also be greater if we do not engage in sensible risk management.

Let’s assume we hold the position for 10 days and that the best brokerage rate we get is around .04% for traditional online broking and .01% with most CFD providers.

To ‘trade’ 1000 CFD’s will cost us a deposit of $500- deposits will vary anywhere from 3-20% depending on the stock and the provider, as a general rule count on 5% for the top 100 stocks.

When we ‘buy’ a CFD the provider is essentially lending us money to purchase our position. For the privilege they charge us the standard bank rate [RBA in Australia] which at time of writing is 5.75% + a ‘haircut’ of between 2 and 4%. This is a financing charge made by the provider let’s assume in our example the provider is adding 3.25% to take the interest rate to 9%. this equates to a charge of around $2.46 per day on a position size of 1000 shares.

Note when we sell short a stock the provider will PAY us interest. Though not at the same rate as when we buy usually the ‘haircut is in the 1 to 2% range so you would receive 5.75% -2%, or 3.75% on your short trade.

Dividends and adjustments:

CFD’s receive the full dividends that the normal stock does as well as any share splits or special payments. If in a short position you must pay the provider.

If we are taking a long position [planning that our share will rise] then CFD’s are a great short term option. If we bought a $10000 position and held it for a year we would need to pay $900 of interest. Similarly a Margin loan from a bank or other lending institution would charge you around 7 to 12% for the same privilege, but only lend you a maximum of 70% of the value of some shares.

FUTURES A Futures contract is an agreement to buy or sell something at a set price on a FUTURE date. I might agree to pay farmer Fred $25 for a bushel of wheat in August and it is now January… between now and January a hailstorm wipes most of the grain crop… A bushel of wheat is now worth $50, but Farmer Fred now has to sell it to me for the agreed ‘FUTURE’ we agreed on in August of $25. Similarly if there had been an over supply of wheat and it was selling for $13 a bushel to have harvested and delivered. I would still have to pay Farmer Fred $25.

A Futures contract is an AGREEMENT for payment at a set price on a future date.

Some futures contracts are DELIVERABLE. This means you do not want to be holding a contract for oil beyond the expiry date for example…. in the first place you need to cough up the cash for a barrel of oil— value $50000+, then they will come and pump it into your lounge room, unless you have a nearby oil storage facility!

Most contracts are NOT exercised, but just be aware of the time your contract terminates. Most brokers will be on the phone to you the week before- asking if you want to ‘roll’ your contract- that means getting out of the contract that is set to expire and taking up the next contract… In some cases this is monthly. Oil trades this way – expiring around the 20th of the month.

Others are bi-monthly or quarterly. The Australian Share Price Index contract or S.P.I is quarterly, March, June, September and December with expiry around the 15th of the month… you will need to KNOW these dates. Things can get volatile as contracts are ‘rolled over’ from one month to the next contract.

In Australia futures contracts are traded through the Sydney Futures Exchange- which recently merged with the Australian Stock Exchange to become the Australian Securities Exchange.

A number of Futures exchanges operate In the United States; from the East Coast to the West coast. Some of the ones you will be familiar with would be;

NYMX [New York Mercantile Exchange] this is the place where the Crude oil price you see on the news comes from- NYMX light sweet crude is the benchmark. It is traded in an open ‘pit’ session – yep, all those guys wearing funny jackets and doing funny hand signals…… trading takes place between 1000 & 1430 New York time and it then trades electronically for most of the rest of the day. We can also find Comex Gold and silver at the NYMX.

CME Chicago Mercantile exchange- home of the E-mini on the S&P 500. You can also trade Pork bellies here!

CBOT [Chicago Board of Trade] Here you can trade anything from Soybeans to Wheat and Dow futures to 10 Year Bonds

To trade coffee or sugar or frozen orange juice concentrate you need to go to NYBOT-The New York Board of Trade http://www.nybot.com

Euronext is the home of London Sugar, currencies and European interest futures contracts.

To trade a futures contract you will need to open an account with a broker- this will mean a lot of form filling and declaration. After this you will deposit funds to your account. You need to make sure you have enough money to trade the ‘instrument’ you are interested in.

For example to trade corn your may need a deposit of $1000 per contract. But to trade one contract of oil requires a deposit of U.S. $5500, and the range in a trading day might be up to $3000 at $50 a point….. tread carefully.

The Contract on the share price index in Australia is the S.P.I. and currently requires a deposit of AUD $6200- and each point of movement is equivalent to AUD $25.

The S&P 500 has a big contract valued at $250 a point and a ‘mini’ otherwise known as an E-mini contract. This is one of the most liquid futures contracts in the world and is traded ONLY online.

The deposit is U.S. $$3,563 and each 100 point move = $50 so a move from 1498 to 1500 = 200 points or $100. Often the S&P can move five to ten points in a night. Sometimes an astonishing 20! That’s on just one contract.

Currencies Some CFD providers allow you to trade currencies, but when the trading is thick and fast their platforms cannot keep up to dedicated forex providers…. In my experience.

Once again it’s the leverage equation. Most Forex providers give leverage at 100:1 some at 200 to 1 and a few at 400 to 1

This means that with $1000- you can CONTROL $100000 at 100:1

$200000 at 200:1

or $400000 worth of a currency ‘pair’ at 400:1.

Scary if it goes it wrong way!

All FOREX currencies are traded as a pair- I will stick to what are known as the 4 MAJORS these are

GBP/USD- the British pound Versus the U.S. Dollar

EUR/USD- the Euro versus the U.S. Dollar- this is the most highly traded currency pair accounting for 70% of all volume and can have a ’spread’ [buy sell difference] of only 2 pips or points

USD/CHF The U.S. Dollar versus the Swiss Franc

USD/JPY The U.S. Dollar versus the Japanese Yen

In FOREX we Buy one currency and sell another against it… lets look at GBP/USD for instance

The Standard contract size is 100K or $100,000 of the currency You are trading

If I go ‘LONG’ 1 STANDARD contract of the GBP/USD it means I am buying $100,000 worth of US Dollars and simultaneously selling $100,000 worth of British pounds. We pay a small spread- but NO commission.

If the GBP rose in value against the US dollar then to terminate our trade we would have more POUNDS- the one we bought and less DOLLARS the one we sold- so we have made a profit. That’s the basics.

The FOREX market turns over almost 2 Trillion dollars a day, this is five times the money turned over in aLL the stock markets and futures exchanges in the WORLD!. Now that’s liquidity- you will always be able to buy or sell the four majors.

Trading begins at 6am Monday in New Zealand and goes through to 0700 GMT this is known as the “Asian session”, London- which is the ‘center’ of the financial universe then comes on board until around the United states session begins around 7.30 Am New York time…….. Some interesting trading takes place at this change-over time. So the week progresses until 5pm Friday New York time when the action ceases for the weekend and resumes at 6 am New Zealand time…….

One thing to be Very aware of is the wild ranges that can occur in FOREX; these are driven by ‘news’ events- GDP figures, employment figures, Interest rate rises or announcements can all provide phenomenal spikes on 15 minute and hourly charts, which are all very trade-able and profitable…. If you have the right strategy.

There are many websites that will give you a list of events happening on the day. It helps to be aware of these things .

GFT forex have an excellent news ‘calendar’ at http://www.gftforex.com/resources/calendar/calendar.asp In summary leveraged instruments can magnify both your profits AND your losses. Risk management is the key to longevity in any markets trading leveraged instruments.

Author: Paul Penton
Article Source: EzineArticles.com
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CFD Share Trading

CFD share trading is a very efficient trading system that allows traders to sell and buy shares

, currencies, commodities and indices. Usually trading is commission-free and traders have free trading software with streaming quotes and live charts. All live prices and products can be tested on a free practice account. With CFD share trading traders have possibilities to trade on margin that is they can trade shares, commodities or indices without having large capital.

CFD investors, like with shares, have benefits from usual market movements. Their open positions work in real time and they have to deposit only 5 per cent of the shares value, so if you are going to purchase $100,000 worth of shares, you need to have only $5,000.

You do not need physically own shares to trade them with the help of contracts for difference. CFD reflects an index of a share or its performance and when the index is positive, sellers pay buyers, but when it is negative, buyers lose their money.

CFD share trading is suitable for short-term trading and it is not for long-term positions or for ‘buy and forget’ trading. As the owner of a share CFD you will participate in stock splits and get cash dividends. Contracts for difference offer traders great leverage opportunities and allow buying and selling shares that cost 10% of their price only. Usually they charge commission at 0.10 per cent of the CFD on both opening and closing a transaction; brokers may use real prices without hidden charges and offer the so-called commission-free trades where commission is factored into the spread.In order to understand the process and clarify the details of CFD share trading, beginners should read numerous articles that are offered by the internet and give all necessary information on the subject. They will be very helpful for successful trade.

If you are interested in online CFD trading – this site will give you direct access to CFD market.

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