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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

How CFD trading works

How to Trade CFDs

The concept of CFDs is simple. If you think a market is set to rise you 'buy' or if you think the market will fall you 'sell'. The difference between the sell price (bid) and buy price (offer) is known as the 'spread'.

When you trade CFDs you are not physically buying shares, but instead taking a position on whether a price will rise or fall. Your position is free of UK Stamp Duty*.

Key features of CFDs

  • There is no commission to pay on many CFDs, the only charge is the dealing spread. Share CFDs start from just 0.1% commission.
  • Go long or short. You can go long (buy) if you believe market prices will rise, or go short (sell) if you believe market prices will fall.
  • Access thousands of markets from one account, including global indices, individual shares, FX and commodities such as crude oil and precious metals. You can also trade sectors, bonds, options and many more.
  • You can open positions without putting up the full transaction value; gain large exposure by putting down a small initial deposit.
  • 24 hour trading. Many markets are available even when the underlying market is closed. The service offers the largest number of 24-hour quotes on stock indices, giving you the freedom to deal whenever it suits you.
  • Stop losses and market orders to limit your risk. For a small premium, guaranteed stops allow you to put an absolute limit on your risk without affecting your potential profits.

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.

  • A two-way price is quoted (e.g. Vodafone 186/186.1). 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 20% for equities, and pay a small commission from 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.

How do other CFD markets operate?

CFDs can be used to trade a wide range of financial markets, including: indices, FX, commodities and more.

One key difference to share CFDs is that there's no commission to pay - the initial charge is built into the competitive dealing spread.

The best way to see how these types of CFDs work in practice is to look through one of our examples. Before you begin, you can also take steps to become better informed about CFDs by watching our Introduction to CFDs tutorial.

Learn about risk

It is important to understand the risks involved before you begin. This is because CFDs are a leveraged product, it can result in losses which exceed your initial outlay. Find out more about the types of risk and how you can use effective risk management tools to help manage them. Or if you're ready to start trading CFDs now, you can open an account online in minutes.

*This depends on individual circumstances and may be subject to change in the future. Tax laws may differ in a jurisdiction other than the UK.

Open a CFD account

Important information

Spread Betting and CFD trading carry a high level of risk to your capital; you should ensure you understand the risks involved. Please read the full risk warning.

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