Contracts for Difference Questions and Answers

Contracts for Difference FAQs
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Q.	Where did CFDs come from, and why the weird name?
Q.	Tell me more about the origins of CFDs?
Q.	What is a Contract for Difference?
Q.	Show me some examples...
Q.	What markets are available to trade?
Q.	Who trades CFDs?
Q.	What makes a suitable investor?
Q.	Is it ok for a novice to invest in CFDs?
Q.	But what is the difference between investors and speculators?
Q.	Why is trading sometimes said to be a zero-sum game?
Q.	Is trading/investing gambling?
Q.	Are CFDs suitable to use in an investment portfolio?
Q.	Is CFD trading day trading? What do I need to start?
Q.	But is trading contracts for differences gambling!?
Q.	How are CFDs issued?
Q.	What is a contract value?
Q.	What is an equity CFD?
Q.	What stocks are available?
Q.	Ok, but how is commission calculated for a CFD?
Q.	What is the difference between buying a share through a traditional broker versus trading it via a contract for difference?
Q.	Do I get a share certificate when I trade a share CFD?
Q.	Do CFDs have the 3 days settlement period like real shares?
Q.	Why trade CFDs instead of stocks?
Q.	If the CFD price moves like the stock price, why would you trade a CFD on IBM instead of just trading the IBM stock itself?
Q.	What is the difference between trading CFDs on margin and traditional margin trading?
Q.	I'm thinking of applying for a margin loan. Is it correct that interest is only charged from the time the loan is used to buy the shares until the time the shares are sold?
Q.	What are contracts by installments?
Q.	What are the Risks?
Q.	But aren't they more risky than shares trading?
Q.	But do I have the control?
Q.	But how can you lose more than is in your account?
Q.	Aren't the odds against you? The house always wins in the end...
Q.	Why are CFDs free of UK stamp duty?
Q.	Will share CFDs in the UK and Ireland always be free of stamp duty?
Q.	Can I actually trade an index using CFD's?
Q.	What about Commodity CFDs!?
Q.	What is Margin?
Q.	What is Maintenance Margin?
Q.	What is a Contingent Liability Transaction?
Q.	What is gearing (or leverage)?
Q.	Do all CFDs have the same level of leverage, what is the leverage?
Q.	What is NTR?
Q.	What margin is required for a CFD?
Q.	Why do margins vary?
Q.	Just wondering what the effect is in comparison to small leverage say 3/1 and then more 5/1 10/1 and more.
Q.	Why shouldn't you consider 'low margin requirements' being flaunted as a selling point by some providers?
Q.	Is it possible to trade without gearing?
Q.	What is a margin call?
Q.	How is interest charged or credited?
Q.	Why am I charged a financing charge for holding a position overnight?
Q.	I still can't understand why there a charge to hold the position open when I have paid a commission?
Q.	But doesn't the fact that interest is charged make CFDs only useful for short term investments?
Q.	Will IG Markets (or other providers) charge interest on a long trade even if I'm not leveraged?
Q.	The interest is not charged on the amount of funds that you actually borrow to make up the full value but on the full face value of your open positions based on the closing price...
Q.	Can I start trading with £100?
Q.	I was thinking about making a small initial investment (say £200) to pursue shares trading on a daily basis?
Q.	Why is it important to distinguish between margin and leverage?
Q.	How do I calculate my position size?
Q.	To what extent should I gear myself?
Q.	What are the costs of trading CFDs?
Q.	Do I get charged commission for buys and sells?
Q.	How does the provider make money?
Q.	My provider charges me 15 basis points each way. But what are basis points and how are they calculated?
Q.	Please provide me with a quick example comparison of buying a share versus cfds in terms of costs?
Q.	Do CFD brokers really allow people to trade index CFDs commission free?
Q.	How long does a CFD last for?
Q.	I was told that CFDs expire every quarter...?
Q.	Is it possible to trade stocks after-hours?
Q.	What is a Direct Market Access equity CFD?
Q.	What are Stock Auctions?
Q.	What is Market Maker Execution?
Q.	What is the difference between a direct market access broker and a market maker provider?
Q.	How does Level 2 works? How do you read it?
Q.	What are Exchange Traded CFDs?
Q.	What is the difference between Commsec ASX CFDs and Commsec OTC CFDs?
Q.	Are CFDs allowed in Sipps?
Q.	What is the catch?
Q.	How does the Markets in Financial Instruments Directive (MiFID) affect contracts for differences?
Q.	Do investors tend to trade in CFDs as an addition to their investment arsenal as opposed to buying more shares?
Q.	What are the main advantages of CFDs from an investor perspective?
Q.	Why is it so popular among investors?
Q.	How do CFD providers quote their cash index prices?

...Continues here - Short Selling Questions Answered here

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Contracts for Difference FAQs

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