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CFD means Contract For Difference
A CFD mirrors the performance of a share or index and offers the benefits of trading shares without having to physically own them. It is traded on margin, and just like physical shares your profit or loss is determined by the difference between your buy price and your sell price. However, CFDs offer many benefits over and above physical share trading.
Originally used by large institutions to cost-effectively cover their equity exposures, CFDs are now a commonplace trading tool used by retail investors around the world.
What can I trade?
Pulse CFDs allow you to trade Australian and global share, index, sector, treasury and commodity CFDs.
If you have a view on a market sector (such as AusFinance, AusEnergy or AusIndustrial), commodities such as crude oil, gold or wheat, treasuries like US T Bonds or an entire index (US30, UK100, AUSSIE200), Pulse CFDs offer you a cost effective way to trade these instruments from a single trading account.
Click here for a list of all CFD products and their respective margins
Why trade CFDs with us?
Pulse Markets is one of the most experienced CFD broking and advisory services in Australia. Pulse CFDs offers a dynamic CFD broking service.
Our vast market experience in a number of areas including shares, foreign exchanges and commodities; our traders have operated successfully in major markets such as the ASX, SFE and global foreign exchange markets.
We go through 500 charts daily in order to find trade alerts for our clients, and take pride in our highly successful track record which is fully audited by a forensic accountant.
Our Trade Alerts have returned over 300% in 30 months since inception - $50,000 invested in a CFD account has returned a gross profit of $159,659 compared with $3,057 returned from an equal investment in the All Ords in the same period...find out more
We can provide not just execution, but also investment advice on CFD trades. We watch the market for you, leaving you free to enjoy the fruits of your investments.
Most importantly, we share our trading ideas. We are confident our services can help our clients improve their investment performance.
Our team is very experienced in derivatives and is especially focused on Austrailan share CFDs, Forex, Gold, Oil and index trading.
| Example of CFD Share trade |
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CFDs are traded on margin, from 1% for shares, commodities, treasuries, FX and indices. This is a more efficient use of your capital because you only have to allocate a small proportion of the total value of your position to secure a trade, while maintaining full exposure to the market. This enables you to magnify the returns on your investment.
The following is an example of the rates of return on investment when trading CFDs as opposed to physical shares in the same company.
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| CFDs |
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Shares |
| Amount of CFDs |
2,000 |
| Buy Price |
$5.00 |
| Margin Required |
A$300 |
| Commission Charges (to buy) |
A$25 |
| Total Outlay |
A$325 |
| Sell Price |
$5.40 |
| Gross Profit/Loss |
A$800 |
Commission Charges
(buy & sell) |
A$50 |
| Financing Cost (1 day) |
A$1.99 |
| GST (10%) |
A$5.00 |
| Net Profit/Loss |
A$743.01 |
| Return On Investment |
228% |
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| Amount of Shares |
2,000 |
| Buy Price |
$5.00 |
| Initial Outlay |
A$10,000 |
| Commission Charges (to buy) |
A$100 |
| Total Outlay |
A$10,100 |
| Sell Price |
$5.40 |
| Gross Profit/Loss |
A$800 |
Commission Charges
(buy & sell) |
A$200 |
| Financing Cost (1 day) |
- |
| GST (10%) |
A$20 |
| Net Profit/Loss |
A$580 |
| Return On Investment |
6% |
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| N.B. Commission charges may vary based upon agreement with your advisor |
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The example demonstrates net profit received in this instance is greater with Pulse CFDs than with physical shares and Return On Investment is also considerably enhanced.
Based on purchasing 2,000 shares/share CFDs and holding the position for one day. If the price had moved in the opposite direction by 40 cents you would realise a gross loss of A$800 trading with CFDs.
Risks :
CFDs, like many derivative products, carry an inherently higher risk than traditional share trading, and it is possible to lose capital beyond your account balance or initial investment.
In the trading example given above, where the total outlay required for exposure to 2,000 theoretical $5.00 CFDs is $325, this position could be taken with less than $500 in your account. The maximum potential risk, however, is that the share covered by CFDs collapses completely to $0. This would expose you to a potential loss of $10,000 (2,000 x $5.00), for which you would be liable, irrespective of how much money is in your account. While this is an absolute worst case scenario and may be highly unlikely, investors must be aware that it remains a real risk, and that they are liable for any financial losses incurred as a result of negative movements in their market positions.
We highly recommend the use of stop loss orders, and specifically Guaranteed Stop - Loss Orders (GSLOs), in addition to a careful examination of maximum potential losses when entering into a CFD position. If you are unsure of how to use stop losses, or how to calculate the risks and potential losses, please contact us at any time to discuss strategies to protect your capital.
Trading CFDs may not be suitable for everyone, so ensure that you fully understand the risks involved, and seek independent advice if necessary.
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