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.

Share CFDs

Stocks of your Favourite Companies

What is a CFD?

CFD stands for ‘Contract for Difference’, which is an arrangement made between two parties, the buyer and the seller, over the price movement of a specific financial product. Essentially, the seller has to pay the buyer the difference between the present value of an asset and its value at the time the contract was made.

Why trade Share CFDs?

By trading Share CFDs, you gain access to the stock market of some of your favourite companies. As an investor, you’re trading on the price movements on shares of a corporation that is trading in the equity market.

In this sense, the trader is not subject to the ownership of the underlying asset, which is one of the most important aspects of trading CFDs. The trader is effectively free of any negative corporate events, including bankruptcy. However, the trader is vulnerable to the price movements of the underlying stock.

FXTM offers CFDs on nearly 180 major company shares, including but not limited to:

  • Alibaba
  • Amazon
  • Apple
  • Microsoft
  • American Express

Instant Execution Speeds

Our Share CFDs are traded with instant execution, with prices quoted directly from your trading platform, and our speeds have been checked and verified by PwC.

Low Costs

Trading Share CFDs is a much cheaper option than buying and trading the underlying stock, you do not have the associated costs of accessing trading capabilities, because you are not buying the asset. CFDs offer the trader the same profit opportunities as if they had bought the stock, and sometimes even greater due to potentially lower costs.

This is a double-edged sword however, as the trader can suffer the same amount of losses depending on the price movement of the underlying stock.

Example: Buy 1 lot #GE (General Electric)

Deposit: $10,000

Open Price: 31.36

Close Price: 31.94

Notional Value ($) = Volume * Contract Size * Open Price = 1 * 100 * 31.36 = $3,136

Profit: (Close Price - Open Price) * Volume * Contract Size = (31.94 - 31.36) * 1 * 100 = $58

Costs

Swap: Volume * Contract Size * Open Price * Percentage / 360 * Number of nights = 1 * 100 * 31.36 * -2.25% / 360 * 1 = -$0.20

Commission: $0

Cumulative Costs = Swap + Commission = -$0.20 + $0 = -$0.20

Cumulative Costs (%) = (Cumulative Costs / Notional Value) * 100 = (0.20 / 3,136) * 100 = 0.0063%

Cumulative Effect of Costs on Return (without fees) = (Profit / Deposit) * 100 = (58 / 10,000) * 100 = 0.58%

Cumulative Effect of Costs on Return (with fees) = (Profit - Cumulative Costs / Deposit) * 100 = (58 - 0.20 / 10,000 ) * 100 = 0.578%

Reduction of profit = 0.58% - 0.578% = 0.002%

 

Example: Buy 1 lot #GE (General Electric)

Deposit: $10,000

Open Price: 31.36

Close Price: 30.69

Notional Value ($) = Volume * Contract Size * Open Price = 1 * 100 * 31.36 = $3,136

Profit: (Close Price - Open Price) * Volume * Contract Size = (30.69 - 31.36) * 1 * 100 = -$67

Costs

Swap: Volume * Contract Size * Open Price * Percentage / 360 * Number of nights = 1 * 100 * 31.36 * -2.25% / 360 * 1 = -$0.20
 

Commission: $0

Cumulative Costs = Swap + Commission = -$0.20 + $0 = -$0.20

Cumulative Costs (%) = (Cumulative Costs / Notional Value) * 100 = (0.20 / 3,136) * 100 = 0.0063%

Cumulative Effect of Costs on Return (without fees) = (Profit / Deposit) * 100 = (-67 / 10,000) * 100 = -0.67%

Cumulative Effect of Costs on Return (with fees) = (Profit - Cumulative Costs / Deposit) * 100 = (-67 - 0.20 / 10,000 ) * 100 = -0.672%

Reduction of profit = 0.672% - 0.67% = 0.002%

*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) = (58 - 0.20) - (57.8 * 20%) = $46.24.

**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.

Leverage and Margin

With CFDs in general, identical margin requirements apply, regardless of whether you’re going short or long. What’s more, leverage is higher with CFDs than it is with traditional trading and fixed 1:5. Traders will still need to apply proper risk management to their strategies however, because using leverage and margin can potentially amplify losses as well as profits.

Dividends

When trading Share CFDs with FXTM, any positive events that affect relevant companies are passed on to our clients, including price adjustments that reflect the payment of a dividend. As a portion of the companies’ earnings are divided between key shareholders, so they are distributed amongst our clients who are buying or selling CFDs for that company’s share.

Main considerations for Share CFDs:

  • FXTM has access to real-time data straight from the NYSE and NASDAQ, the world’s two largest stock exchanges.
  • The trading hours for Share CFDs are identical to the trading hours of the original exchange that the actual shares are traded on.
  • If a stock market is falling, losses may be incurred, but potential opportunities for profit also exist.
  • While trading Share CFDs is popular, it’s important to keep in mind that they carry the same risk as trading any leveraged asset.
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