What is CFD trading?

If you have already invested in an existing portfolio of physical shares with another broker and you think they may lose some of their value over the short term, you can hedge your physical shares using CFDs. By short selling the same shares as CFDs, you can try and make a profit from the short-term downtrend to offset any loss from your existing portfolio.

Note: For the avoidance of doubt, the Client’s liability or responsibility to pay the Inactive Account Fee will cease as soon as the Client Account balance is zero.

CFD Trade Example

So, how exactly does one trade a CFD? Let’s take a look at an example of a CFD trade using the popularly traded ‘Germany 30’ index as an example;

In the following theoretical example, ‘Germany 30’ is currently trading at a level of 9610.5/9611.5, giving me the option of selling the German index at the 9610.5 level or buying at 9611.5. I decide to buy £5 of the ‘Germany 30’ at that 9611.5 level, and my nominal risk in this instance would be worked out as follows;

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