CFD stands for Contract for Difference. This is an agreement between two parties, a buyer and a seller, whereby the seller has to pay the buyer the difference in the value of an asset at present time and the value at contract time. CFDs are becoming more and more popular among traders because they carry a number of advantages.
Share CFD Definition
At ForexTime (FXTM) you can gain access to the stock market by trading Share CFDs. With Share CFDs, there is no need to physically own the underlying shares in order to trade in them. An investor can either buy or sell shares of a corporation that is trading in the equity market.
We offer CFDs on over 40 major company shares including Amazon, Apple, Microsoft and American Express.
Advantages of CFDs
- Ability to take both long and short positions: if you want to go short, there are no separate selling rules or different margin requirements to going long. Furthermore, since the shares involved have not actually been purchased or sold, there are no borrowing costs.
- Ability to use leverage: leverage is higher with CFDs than it is with traditional trading and often the margin requirement starts from just 2%. Higher leverage enables you to trade greater quantities by depositing only a small percentage.
- High exposure to the stock market: the absence of strict restrictions concerning margin requirements gives easier access to the stock market.
- High speed execution: execution is immediate so the possibility of delay is avoided altogether.
- Profit even during a falling market: the ability to take a short position as easily as a long position means that traders will not be affected by a market in decline because they can act accordingly.
The trading hours for Share CFDs are identical to the trading hours of the original exchange that the actual shares are traded on.