Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs on Indices

U.S., European, Australian and Asian Indices

What is CFD Trading?

A Contract for Difference (CFD) is a contract made between a buyer and a seller for a specified product, where one party agrees to pay the other the price difference between the opening and the closing price of the contract.

CFD trading offers investors access to the financial markets, without buying physical/underlying products. Instead, they purchase contracts speculating on future price actions.

Trading CFDs on Indices

With FXTM, you can trade CFDs on some of the most prominent securities in the U.S., Europe, Australia and Asia. These include, but are not limited to:

  • GDAX (Dax 30)
  • AUS200 (Australia 200)
  • ND100m (US Tech 100 - Mini)
  • UK100 (UK 100)
  • SP500m (US SPX 500 - Mini)

Leverage

CFDs are popular with traders because they offer a low-cost entry into the financial markets. Leverage means that traders only need to invest a fraction of the total cost of the contract themselves, enabling them to potentially generate a greater return. However, leverage cuts both ways, and has the same potential to increase losses as well as profits.

Low Costs

Trading CFDs on Indices is less costly than trading the underlying index, while offering equal potential to deliver gains. If a trader has a CFD on a long position and the index appreciates, they could make an even greater profit than an investor owning a stock included in the index, due to lower costs. Similarly, they could also make a greater loss if the price declines.

Example: Buy 1 lot WSt30m (Wall Street 30 mini)

Deposit: $10,000

Open Price: 23,508

Close Price: 23,599

Notional Value ($) = Volume * Contract Size * Open Price = 1 * 10 * 23,508 = $235,080

Profit: (Close Price - Open Price) * Volume = (23,599 - 23,508) * 1 = $91

Costs

Swap: Volume * Swap Rate = 1 * -$4 = -$4

Commission: (Volume * Contract Size * Open Price) / 1,000,000 * Commission * 2 = (1 * 10 * 23,508) / 1,000,000 * -20 * 2 = -$9.40

Cumulative Costs = Swap + Commission = -$4 - $9.40 = -$13.40

Cumulative Costs (%) = (Cumulative Costs / Notional Value) * 100 = (13.4 / 235,080) * 100 = 0.0057%

Cumulative Effect of Costs on Return (without fees) = (Profit / Deposit) * 100 = (91 / 10,000) * 100 = 0.91%

Cumulative Effect of Costs on Return (with fees) = (Profit - Cumulative Costs / Deposit) * 100 = (91 - 4 - 9.40 / 10,000 ) * 100 = 0.78%

Reduction of profit = 0.91% - 0.78% = 0.13%

 

Example: Buy 1 lot WSt30m (Wall Street 30 mini)

Deposit: $10,000

Open Price: 23,508

Close Price: 23,447

Notional Value ($) = Volume * Contract Size * Open Price = 1 * 10 * 23,508 = $235,080

Profit: (Close Price - Open Price) * Volume = (23,447 - 23,508) * 1 = -$61

Costs

Swap: Volume * Swap Rate = 1 * -$4 = -$4

Commission: (Volume * Contract Size * Open Price) / 1,000,000 * Commission * 2 = (1 * 10 * 23,508) / 1,000,000 * -20 * 2 = -$9.40

Cumulative Costs = Swap + Commission = -$4 - $9.40 = -$13.40

Cumulative Costs (%) = (Cumulative Costs / Notional Value) * 100 = (13.4 / 235,080) * 100 = 0.0057%

Cumulative Effect of Costs on Return (without fees) = (Profit / Deposit) * 100 = (-61 / 10,000) * 100 = -0.61%

Cumulative Effect of Costs on Return (with fees) = (Profit - Cumulative Costs / Deposit) * 100 = (-61 - 4 - 9.40 / 10,000 ) * 100 = -0.74%

Reduction of profit = 0.74% - 0.61% = 0.13%

*For FXTM Invest, the Strategy Profit Share represents a percentage of the profits that will be awarded to the Strategy Manager for his/her positive performance. Example: If the above example refers to a profitable trade in FXTM Invest, and the Strategy Manager sets a performance fee of 20%, then the Client’s net profit would amount to: (Net Profit) - (Net Profit * 20% Manager fee) = (91 - 13.4) - (77.6 * 20%) = $62.08.

**Such estimations are based on assumptions and may deviate from costs and charges that will actually be incurred. Swaps and commissions may be subject to change. For more information please refer to our contract specifications and commissions pages. Transaction costs and fees incurred in currencies other than the currency of the account are converted on a real-time basis in MetaTrader, at no additional cost to the client.

Fast Execution Speeds

CFDs on Indices are available with both instant and market execution. This means your orders are executed with no delay, guaranteeing you fast and efficient trading.

Key features for trading CFDs on Indices:

  • Indices receive dividends depending on the net dividend of the shares they are composed of. FXTM clients trading CFDs on Indices benefit from these dividends.
  • With CFDs, the same margin requirements apply regardless of whether you’re selling or buying.
  • Since you can take both short and long positions with CFDs, a bearish market holds the same risks for incurring losses, but it also offers potential opportunities for profit.
  • Trading CFDs on Indices is far less costly than trading the underlying index, but offers the potential to deliver similar gains and losses.
  • While many traders find CFDs appealing, always remember that they carry the same risk as trading any leveraged asset.

For a full list of Spot Indices offered by FXTM for CFD trading, please visit our Contract Specifications page.

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