CONTRACT FOR DIFFERENCE (CFD'S)
What are CFD’s?
“Contracts for Difference” (CFD) is a popular type of derivative product. Trading CFD's enables investors to exploit profits on the price movements of the underlying financial assets, such as shares, indices, forex, treasuries and commodities.
Instead of owning the actual asset (e.g. physical shares, currency pairs, or commodities), CFD's are an agreement to exchange the price difference of the underlying asset from the time that the contract is opened to the time it's closed. Even though the investors never actually own the asset, they exploit benefits when the price moves in their favour, and vice versa.
CFD's are leveraged, which means that only a small percentage of the full value of the position will be needed to be deposited as capital. This is known as trade on margin. On one hand trading on margin will magnify investors’ return, however on the other hand losses are magnified when there’s a losing trade.
It is possible that the losses are bigger than the initial capital the investors have put in.
Benefits of trading CFD’s
With trading CFD's, no matter where the price goes (up or down), you can get benefit either way by buying (going long) or selling (shorting) the product. CFDs are commonly used as a way of hedging the existing portfolios. CFDs can be trade on margin (leveraged), a way to exploit bigger profit with limited capital.
“Contracts for Difference” (CFD) is a popular type of derivative product. Trading CFD's enables investors to exploit profits on the price movements of the underlying financial assets, such as shares, indices, forex, treasuries and commodities.
Instead of owning the actual asset (e.g. physical shares, currency pairs, or commodities), CFD's are an agreement to exchange the price difference of the underlying asset from the time that the contract is opened to the time it's closed. Even though the investors never actually own the asset, they exploit benefits when the price moves in their favour, and vice versa.
CFD's are leveraged, which means that only a small percentage of the full value of the position will be needed to be deposited as capital. This is known as trade on margin. On one hand trading on margin will magnify investors’ return, however on the other hand losses are magnified when there’s a losing trade.
It is possible that the losses are bigger than the initial capital the investors have put in.
Benefits of trading CFD’s
With trading CFD's, no matter where the price goes (up or down), you can get benefit either way by buying (going long) or selling (shorting) the product. CFDs are commonly used as a way of hedging the existing portfolios. CFDs can be trade on margin (leveraged), a way to exploit bigger profit with limited capital.
CFD Examples
For example, to buy the equivalent of 100 CFD shares of the US100 Index with GPP Markets, you may only need to deposit 1% of the total position value that you might have to pay if you were buying physical shares from a stock broker.
If each share cost $6,952 then you would only need to deposit $6,952 of position margin with us (1% of $695,200 = $6,952), spreads exclusive.
For example, to buy the equivalent of 100 CFD shares of the US100 Index with GPP Markets, you may only need to deposit 1% of the total position value that you might have to pay if you were buying physical shares from a stock broker.
If each share cost $6,952 then you would only need to deposit $6,952 of position margin with us (1% of $695,200 = $6,952), spreads exclusive.
FOREX
About Forex
The Forex marketplace is the largest and the most liquid market in the world and has contributed to the ease of global travel, trading online efficiency, and instant international communication. The world is becoming smaller, and the need to exchanging different currencies is becoming more and more needed all the time. Currencies are traded against each other more and more often which has made the forex trading market grow at a fast pace and become more responsive and dynamic. The forex market is open 24 hours every business day with no central marketplace.
Forex Leverage
Trading with Leverage On
Trading with leverage enable investors to gain a larger exposure to a market with a relatively small deposit by borrowing capital. This is the way that investor’s profits can potentially be multiplied, for profit as well as loss. Investors can obtain some of the lowest margin rates (highest leverage) in the forex market, which is an extremely attractive proposition to investors that like to trade with leverage.
Way to Leverage Function
Trading leverage (trading on margin) will magnify investors’ profit if the price moves in investors’ favour, however, there is a potential that investors lose the initial deposit if the price move against investors’ favour. Any profits and losses are based on the full value, not the deposit amount, which could be a lot higher. At GPP Markets, our lowest margin rate is 1%, also can be referred to as ‘100:1 leverage’. This indicates that investors can open a position worth up to 100 times more than the initial deposit investor put in when the trade first opened.
The Forex marketplace is the largest and the most liquid market in the world and has contributed to the ease of global travel, trading online efficiency, and instant international communication. The world is becoming smaller, and the need to exchanging different currencies is becoming more and more needed all the time. Currencies are traded against each other more and more often which has made the forex trading market grow at a fast pace and become more responsive and dynamic. The forex market is open 24 hours every business day with no central marketplace.
Forex Leverage
Trading with Leverage On
Trading with leverage enable investors to gain a larger exposure to a market with a relatively small deposit by borrowing capital. This is the way that investor’s profits can potentially be multiplied, for profit as well as loss. Investors can obtain some of the lowest margin rates (highest leverage) in the forex market, which is an extremely attractive proposition to investors that like to trade with leverage.
Way to Leverage Function
Trading leverage (trading on margin) will magnify investors’ profit if the price moves in investors’ favour, however, there is a potential that investors lose the initial deposit if the price move against investors’ favour. Any profits and losses are based on the full value, not the deposit amount, which could be a lot higher. At GPP Markets, our lowest margin rate is 1%, also can be referred to as ‘100:1 leverage’. This indicates that investors can open a position worth up to 100 times more than the initial deposit investor put in when the trade first opened.
Forex Examples
Each underlying asset will have a bid price and an offer price. To buy a contract over the underlying asset (go long on the contract), you will buy at the offer price multiplied by the contract size. If you sell a contract over the underlying asset (go short on the contract), you will sell at the bid price multiplied by the contract size.
For example
If a EUR/USD currency pair is quoted at 1.12751/1.12765:
To buy EUR, you would buy at 1.12765 x contract size; and
To sell EUR, you would sell at 1.12751 x contract size.
In this example, the difference between the two prices is the ‘spread’. Clients can use the online platform to see all orders, open positions, profit and loss reports and statements at any time. As this shows real time profit and loss results, clients are able to use this information to determine whether they wish to close their positions. As soon as a position is closed, any resulting funds can then be used as deposit for further positions.
Each underlying asset will have a bid price and an offer price. To buy a contract over the underlying asset (go long on the contract), you will buy at the offer price multiplied by the contract size. If you sell a contract over the underlying asset (go short on the contract), you will sell at the bid price multiplied by the contract size.
For example
If a EUR/USD currency pair is quoted at 1.12751/1.12765:
To buy EUR, you would buy at 1.12765 x contract size; and
To sell EUR, you would sell at 1.12751 x contract size.
In this example, the difference between the two prices is the ‘spread’. Clients can use the online platform to see all orders, open positions, profit and loss reports and statements at any time. As this shows real time profit and loss results, clients are able to use this information to determine whether they wish to close their positions. As soon as a position is closed, any resulting funds can then be used as deposit for further positions.
Trading CFDs may not be suitable for everyone as they are high risk financial product. Please ensure that you understand the risks involved. A Product Disclosure Statement can be obtained here and should be considered before trading with us.
GPP Markets is also a member of an independent dispute resolution scheme the Financial Services Complaints Limited (“FSCL”) our membership number is 6397. This is approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
GPP Markets Ltd is a company registered in New Zealand (NZBN 9429042010807) located at Level 21 191 Queen Street, Auckland; PO Box 5382, Wellesley Street, Auckland.Phone: +64 9 281 2012 email: info@gppmarkets.com. GPP Markets Ltd is a registered Financial Service Provider (FSP509766) and holds a Derivative Issuer Licence issued by the Financial Markets Authority.
GPP Markets is also a member of an independent dispute resolution scheme the Financial Services Complaints Limited (“FSCL”) our membership number is 6397. This is approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
GPP Markets Ltd is a company registered in New Zealand (NZBN 9429042010807) located at Level 21 191 Queen Street, Auckland; PO Box 5382, Wellesley Street, Auckland.Phone: +64 9 281 2012 email: info@gppmarkets.com. GPP Markets Ltd is a registered Financial Service Provider (FSP509766) and holds a Derivative Issuer Licence issued by the Financial Markets Authority.