CFDs are becoming increasingly popular because they offer many benefits that the stock market does not, such as guaranteed stop loss orders, leverage, ability to easily short sell and access to a large range of global markets and trading instruments, ranging from share CFDs, indices to commodities and foreign exchange.
If you are not sure what a CFD is, read on below for more information. But, firstly I want to share with you a special deal that I have set-up with my CFD provider - CMC Markets.
CMC is Australia's largest CFD provider. You can trade shares on the ASX or access global markets with over 3,000 share, index, sector, foreign exchange, commodity, treasury and bullion CFDs through their award winning Market Maker platform.
I have been trading CFDs with CMC Markets since they started in Australia in 2002 and I have been very impressed with their superior online trading platform, range of CFDs on offer and low margin requirements. Of course there are always things that as a trader you wish your CFD provider could offer you, that they do not have available. I approached CMC about these things and have negotiated a special deal that is exclusive to Smart Trading and you can benefit from them to when you open a new account and mention Smart Trading.
These benefits are exclusive and include the following reductions and special features on ASX and International share CFD trading:
- Commission charges reduced by 0.02%
For example, you can trade ASX Share CFDs for 0.08% commission compared to the standard commission of 0.10%. Exceptions are US and Canada, which have a different commission structure. Current CMC Commission charges can be viewed from the CMC Market Rates Schedule
- A reduction of 0.25% on the overnight financing rate.
- Availability of Market Trigger Orders
These triggers are Stop Entry Orders that allow you to open a new position or increase an existing position at a price which is inferior to the current market price. I love these orders and set them up regularly now to enter into trades on a break of a specific price point. Exceptions are Hong Kong and ASX Share CFDs are limited to Top 200 CMC Markets ASX share CFDs (comprising of the shares in the CFD Australia Top 100 Share Folder and CFD Australia Other Shares Folder).
- Free movement of Guaranteed Stop Loss Orders (GSLOs)
A huge bonus that guarantees all your stop loss orders at the price you set and you can change them as the trade moves your way at no cost.Pay one initial premium to set the GSLO and then they are free to move.
You can read more about GSLOs and how they work plus other detailed information from CMC Markets in the Product Disclosure Statement
Plus, you can trades shares all from the one trading account. I have just moved my share trading over to CMC Markets and I am very impressed with their web based platform. Not only can I trade shares, but I have linked my CFD account to my share trading account and I can now trade both shares and CFDs from the one account online. No need to use a different trading platform or broker.
Click here to read more about trading shares with CMC Markets
In order to access these special discounts and features you will need to either contact CMC on the relevant number below and
mention Smart Trading or click on the exclusive web link below to
open an account online.
CMC Markets Australian Office:
Canice Kinnane
Account Manager
Direct Phone Number: 02 8915 9244
General Toll Free Phone Number: 1300 303 888
Email: c.kinnane@cmcmarkets.com
CMC Markets New Zealand Office:
Toll Free Number: 0800 262 627
Click here to
visit CMC Markets website for more information or to open an account online
A CFD is a contract between you and the company that you are using to make the purchase. You trade the same shares as with the ASX, but in a simulated market environment. If you were to buy 1000 National Australia Bank CFDs, you would have a contract with the CFD provider for that trade. A shareholder, on the other hand, actually owns a stake in the company. In short, a CFD offers the benefits of trading shares by mirroring the performance of the share or index, without the need to actually own them.
CFD trading has the following advantages and disadvantages:
- With the power of leverage, you can trade CFDs with margins from as low as 1%.
- Traders can earn interest through short selling. This is a strategy used to trade falling shares and you can find out more about it from my article on handling a bear market.
- Traders can access a wide range of global markets with most major CFD providers.
- Traders can trade a range of instruments including share CFDs, foreign exchange, indices and commodities, all with one provider. This means it is easy to diversify between a range of different sectors or industry types, as well as different markets and instruments.
- CFD traders can set guaranteed stop loss orders (GSLOs). As per their name, these stops are guaranteed and you will be exited out of a trade at the exact price you set, no matter what the share price does. This is not possible in the real market.
- Trading CFDs is similar to trading shares because they have no time component and are not as complicated as trading options.
- Dividends are paid on share CFDs (although no franking credits are included).
- Like shares, CFDs are easy to buy and sell if you are dealing with liquid CFDs.
- Traders are required to pay interest on a daily basis for all CFD long positions held overnight.
- CFD traders have no voting rights or entitlements to shareholder discounts or incentive benefits.
- CFDs carry no franking credits on dividends.
- There is only a small range of share CFDs available for trading. Depending on the provider, you may have access to anything from 50 to 500 share CFDs.
- Leverage is also a disadvantage because it is very easy to trade well beyond your means and wipe out your trading capital in a short space of time if you are not careful. This can be overcome with the use of GSLOs.
Be aware that CFDs are highly leveraged instruments and carry a high degree of risk to your capital. It is possible to lose more than your initial investment. You should only speculate with money you can afford to lose. These instruments may not be suitable for all investors, therefore ensure you fully understand the risks involved, seek independent advice and fully read and understand the relevant Product Disclosure Statement.
Disclaimer: Smart Trading Pty Ltd is a Corporate Authorised Representative of CDM Pacific Pty Ltd AFSL 223682 and as such any information is provided as general advice only. The information provided may not be suitable to your individual circumstances or needs. You should always read the relevant CMC Markets Product Disclosure Statement (PDS) and obtain independent investment advice from a licensed investment professional prior to making any investment decisions. Smart Trading has a relationship with CMC Markets. If, as a result of our referral, you decide to open an account with CMC Markets and use their financial services we will receive remuneration from CMC Markets. Refer to Smart Trading's Financial Services Guide (FSG) for further details.
