CFDs are a financial instrument that give you leveraged trading power and flexibility. With IG Markets you get fixed transparent pricing on all of the markets we cover, including shares, indices, forex, binaries, options, commodities and more.
The concept of CFD trading is simple. If you think a market is set to rise you buy at the top end of our quote (the offer price), or if you think the market will fall you sell at the bottom of our quote (the bid price).
Your position is a contract: you never actually own the instrument you are buying. The important fact is that when you buy you want the price to go up, and when you sell you want the price to drop.
Example: Buying Westpac Banking Corp
It is March and our quote for Westpac is A$15.70/15.71. You believe Westpac will start its recovery and decide to buy 1,000 shares on the ASX, as a CFD at A$15.71, the offer price. Your initial outlay is just 10% x 1,000 shares x A$15.71 = A$1571. The same outlay with a regular stockbroker would only give you exposure to the performance of 100 shares.*
Our standard commission rate on this transaction is just 0.1% or A$15.71 (1,000 shares x A$15.71 x 0.1%) (see Contract Details). While your position remains open, your account is debited to reflect interest adjustments and credited to reflect any dividends.
A week later, Westpac has climbed to A$17.19/17.20 in the market and you decide to take your profit. You sell 1,000 shares at A$17.19, the bid price. The commission on this transaction is 0.1% or A$17.19 (1,000 shares x A$17.19 x 0.1%).
Your gross profit on the trade is calculated as follows:
Profit
| Closing level | A$17.19 |
| Opening level | A$15.71 |
| Difference | A$1.48 |
Profit: A$1.48 x 1000 = A$1,480
To calculate the overall result on the transaction you would also have to take into account the commission you have paid and the interest and dividend adjustments. The Detailed Example includes these charges and adjustments.
*Please note that trading CFDs is a geared investment strategy, carrying a high risk to your capital. Only trade with money you can afford to lose. Please see our Risk Warning for more details.
The PureDeal platform
Trade CFDs at the market price using our browser-based PureDeal platform. PureDeal has a customisable interface which provides quick fire one-click dealing and full account management. Through PureDeal we also offer a full range of free trading tools and charting packages which provide up-to-the minute news and research to help your trading.
Learn about risk
CFDs are a leveraged product, so it is important to understand the risks involved before beginning to trade. Find out more about about types of risk and how to manage them, or if you're ready to start trading CFDs now, you can open an account online in minutes.