CFDs Explained | How to trade CFDs | Learn CFD Trading

CFDs are the flexible way to trade on thousands of financial markets. The concept is simple: we quote a price, you 'buy' if you want the market to rise and 'sell' if you expect it to fall.

How do Share CFDs work?

A Share CFD is an undated contract that captures every aspect of share trading. You trade at the underlying market price, but you don't actually own the shares and do not have to put up the full contract value.

• We quote a two-way price (i.e. Vodafone 135/135.5). You 'buy' at the top end if you think the market will rise, or 'sell' at the bottom end if you think it will fall.
• To open your trade, you do not need to pay the full amount for the position.
• You trade on 'margin', a deposit starting from 5% for equities, and pay a small commission of 0.10% per transaction.
• Share CFDs have no fixed expiry date, so you can close your position whenever you like.
• While your position remains open your account is debited or credited to reflect interest and dividend adjustments.

Interest and dividend adjustments

When your position is open you pay or receive daily interest adjustments depending on whether you have a long or a short position.

Long positions

Your account is debited to reflect interest adjustments and credited to reflect any dividends. This mirrors the effect of buying shares in the normal way, where you no longer earn interest on the funds used to buy the shares, but receive dividends instead.

Short positions

Your account is debited to reflect any dividends and credited with interest adjustments, unless LIBOR is less than 2.5%, in which case short positions will incur a debit. This mirrors the effect of selling shares, where you earn interest on the proceeds of the sale, but cease to receive dividends.

Our interest rates are highly competitive, based on the inter-bank offered rate for the currency that the trade is denominated in, plus/minus 2.5%. If you choose to go short, you may also be charged a borrowing fee, which will be included in the interest adjustment applied to your position. Dividend adjustments are applied if you have an open position in a share on the ex-dividend date.

How do other CFD markets operate?

We offer thousands of CFD markets, including indices, forex, commodities and more. Markets such as Gold or Oil are 'expiry transactions'. They have a fixed expiry date, so if you have not closed such a position by its expiry date, it will close automatically.

Our other CFD markets operate in a similar fashion to Share CFDs. One key difference is that with Share CFDs you trade at the underlying market price and pay a small commission on your trades, but with our other markets there is no commission to pay – the only charge is our competitive dealing spread.

The best way to see how CFDs work in practice is to look through an example.