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An introduction to CFD trading

 

A Contract for Difference (CFD) is a simple way to trade many global financial instruments. They are the type of derivative that enables you to trade the price movements of these financial markets with us – you won’t own the underlying asset, you will only get exposure to its price movements.

 

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Why trade CFDs?

 

CFDs are a flexible form of trading that allow you to take advantage of both rising and falling markets. When trading CFDs you are predicting whether an asset price will rise of fall.

If you think the price will go up, you ‘buy’ (go long) and if you think the price will fall, you ‘sell’ (go short). The outcome of your prediction will determine whether you make a profit or incur a loss. You can gain access to multiple asset classes, including Indices, Metals, Commodities, Treasuries and Equities.

Advantages of CFD trading:

Flexibility: go ‘long’ or ‘short’ to capitalise on either a rising or falling market.


Leverage: magnifies both your potential profit and loss, so it’s important to understand the risks involved. CFD trading uses leverage to enable you to get market exposure for a small initial deposit, known as margin.


Global market access: trade the world’s major markets across a variety of asset classes, including Indices, Equities and Commodities.

How to trade CFDs

 

Why are there two prices for each CFD?

In CFD pricing there is a bid price and an offer price. These are the price levels that you can sell at (the bid price) or can buy at (the offer price).

If you anticipate that the price of an instrument like a stock index or a commodity will increase, you open a buy (long) position with a view to exiting this position when the instrument has reached a higher price. Alternatively, if you anticipate that the price of an equity or a bond is likely to fall, then you open a sell (short) position with a view to exiting this if the price goes lower.

What does ‘sell’ a CFD mean?

How can you sell something you don’t already own? The concept of opening a sell position (or going short) in CFD trading, means you are taking the view that you think a price will fall – even though you don’t own the underlying asset.

What do the prices mean?

Our CFDs will be traded in the underlying currency of the symbol, unless otherwise specified on our market information sheets. For example: a CFD on the US Dow Jones equity index will be traded in US Dollars, while a UK equity like Vodafone will be traded in British Pounds.

 

Threes steps to start trading CFD with ADSS:


1.  Submit your application – access our MT4 trading platform in no time.


2.  Fund your account – using UAEPGS, Skrill, NETELLER, Maestro, Visa and Mastercard.


3.  Place your first trade – with a wide range of CFDs, currency pairs and cryptocurrencies.

Professional CFD Trading

We offer a range of trading tools and charts to support you CFD trading. Our comprehensive charts display live market prices for some of our most traded instruments. For example: when trading currency pairs such as GBP/USD you can look to identify trends and use this information to inform your CFD trading decisions.

Using trading tools can be useful for you whether you’re an experienced trader, casual trader, or a beginner. However, for those of you who are just starting out they can also be a great way for you to develop your analysis skills and help you to better understand the markets. Equally, they can still help experienced traders by providing potentially valuable insights into some of our most popular traded instruments and can help you to better recognise the potential risks

Examples of live CFD prices

Put our learning resources into practice. Here’s a short list with live market CFD prices for the most traded instruments, based on the ADSS account types that you can choose from

Pricing from Trading View is indicative and does not represent ADSS pricing.

Starting rates

Generally the spread refers to the difference between the buy and the sell prices, known as the bid-ask spread.  Spreads will differ depending on the time of day and whether the market is open or not. 

 

Asset class Minimum Margin Maximum Leverage
FX 0.20% 500:1
Indices 0.30% 333:1
Metals 0.50% 200:1
Energy 1% 100:1
Shares 5% 20:1
Cryptos 25% 4:1

 

 

FX

Example 1
Buy 10 lots of EURUSD @ 1.1600
Exposure = 10*100,000*1.1600 = $1,160,000
Margin requirement = $1,160,000 ÷ 500 = $2,320

Example 2
Sell 5 lots of USDJPY @ 112.00
Exposure = 5*100,000 = $500,000
Margin requirement = $500,000 ÷ 500 = $1,000

Example 3
Buy 1 lot of GBPJPY @ 150.673 {GBPUSD = 1.3465 and USDJPY = 111.90}
Exposure = 1*100,000*1.3465 = $134,650
Margin requirement = $134,650 ÷ 500 = $269.30

Indices

Example 1
Buy 1 lot of US30.Cash @ 34,500
Exposure = 1*34,500 = $34,500
Margin Requirement = 34,500 ÷ 333 = $103.60

Example 2
Sell 5 lots of German. Cash @ 15,345 {EURUSD = 1.1600}
Exposure = 5*15,345*1.16000 = $89,001
Margin Requirement = $89,001 ÷ 333 = $267.27

 

The amount of leverage available to you can vary and will depend on your trading positions. The more volume you trade, the more the leverage on offer will decrease. To know more, please download the dynamic margin sheet.

 

Download

 

Learn. Explore. Pursue more.

 

Join our trading community to access our free weekly webinars, and our library of tutorial videos and how-to guides. Designed to help you navigate the index, forex, equities, cryptocurrency and commodities markets, analyse the latest news and insights and become a better trader.

 

Learn how to
trade Forex

 

Get to know Aussies, Guppies and Loonies – you’ll be trading FX pairs in no time.

Learn how to
trade bitcoin
 

Set your crypto compass to help you navigate the world’s most volatile markets.

Learn how to
trade CFDs
 

Master the highs, the lows, the longs and the shorts of trading Contracts for Difference (CFD).


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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.

ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.

The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.

ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.