CFDs are a way of trading the price movements of global financial markets without buying or selling the underlying instrument directly.
CFDs can be used to speculate on rising as well as falling prices, thus offering a flexible alternative to traditional trading. When trading CFDs, you simply place a trade with a CFD provider such as City Index on the instrument of your choice.
At City Index, we offer access to over 10,000 instruments including indices, equities and currencies. The price of our CFD markets replicates the price of the underlying asset, giving you a profit (or loss) in line with any upward or downward movement in the price of the underlying market.
All share CFD markets are charged a small commission for each trade that you place with us. At City Index, we charge a commission rate of 0.08% (minimum SGD10) on all SGD share CFDs. For all non SGD shares, we charge a minimum commission rate of 0.05% or JPY1000 for JP shares, 0.08% or A$5 for AU shares and 0.15% or HK$15 for HKD shares. Our commission per US share CFD trade is just USD0.02, with a minimum payable amount of USD15. Non-equity markets are commission-free but incur a widened spread.
Find out more about our financing and charges. All our CFDs are traded in the currency of the underlying market.
do CFDs work?
As with traditional share dealing, CFD prices are quoted as a Bid (the price at which you can sell) and Offer (the price at which you can buy). CFDs are traded on margin (also known as leverage), which means that to open a position you need to deposit a small fraction of the full value of your trade, known as initial margin. The initial margin required varies across different markets though would typically be betrween10%-25% for an equity CFD trade and between 2%-5% for an index or currency trade.
CFD trading therefore offers the possibility of a much better return on your initial investment than paying for the trade in full. Conversely, potential losses are also amplified and if the price of the underlying asset goes the wrong way, you stand to make a larger proportionate loss than if you owned the asset directly.
CFD trading example
CFD trading is straightforward – if you think a market will rise you buy (go 'long'), and if you think it will fall you sell (go 'short').
You believe that Singapore Airlines’ shares will rise over the coming weeks as the company is set to report a bumper set of earnings, so you decide to buy a 2,000 CFDs.
City Index quotes you a spread of 10.48/10.49 for Singapore Airlines.