CFDs : The definitive guide to trading contracts for difference

The pace of financial markets innovation has increased dramatically over the past twenty years, with a dizzying range of alternative trading products and services now available to retail investors and professional traders alike. Investors seek several things: leverage, cost-effectiveness, best executable prices and flexibility, and innovative products like CFDs provide those benefits. CFDs are flexible trading instruments offering high degrees of leverage, the opportunity to go long and short and to hedge open positions in other tradable instruments. Speculators can take advantage of underlying instrument price movements without having to take possession of the underlying, and portfolio managers can hedge their portfolios without having to liquidate their holdings. Since their inception in the late 1980s as institutional trading instruments, CFDs have become popular with retail, semi-professional and professional investors because of their unique trading characteristics and their tax benefits. This is the first book to provide a comprehensive description of all aspects of trading CFD products. It includes the following: What a CFD is, how it is priced, and the range of different CFDs and markets available to trade; the principles of CFDs and the mechanics of opening, funding and maintaining a CFD trading account and the different types of account that are available; the logistics of trading CFDs including details of tradable markets, the range of underlying instruments and popular trading strategies; the benefits and risks of trading CFDs including leverage, shorting, hedging and capital gains tax management; a comparison between CFDs and other trading instruments like spreadbetting, stock trading, and derivative trading; the ways in which CFDs can be accessed via different providers including direct access facilities, broker intermediation and market maker quoting; controlling risk through the use of stop loss limits, trailing stops, guaranteed stops and limited liability orders; and, the regulation of CFD trading and the expected impact of MiFID.