CFDs are a flexible alternative to conventional trading. With IG Markets you get transparent pricing on all the markets we cover, including shares, forex and indices.
The concept behind CFD trading is straight-forward. When you think a market is set to rise you buy at the top end of our quote - the offer price. If you think the market will fall you sell at the bottom of our quote - the bid price.
What is key about CFDs in that your position is a contract: you never actually own the asset you are trading. What you must remember is that when you are buying you want the price to go up, and when you sell you want the price to fall.
Selling Singapore Airlines: opening the position
It is 16 March 2009 and you decide to open a short position on Singapore Airlines. The stock is quoted at 10.30/10.32 in the market, and you sell 1500 shares as a CFD at $10.30, the bid price.
Instead of putting up the full value of the shares ($10.30 x 1500), you need only supply a deposit of 10% or $1545.
Our standard commission rate on this transaction is just 0.2% or $30.90 (1,500 shares x $10.30 x 0.2%). While your position remains open, your account is debited to reflect interest adjustments and any dividends.
It is near the end of the day and Singapore Airlines has fallen steadily to 10.14/10.16 in the market and you decide to take your profit. You buy 1500 shares at $10.16, the offer price.
Your gross profit on the trade is calculated as follows:
Profit
| Closing level | $10.16 |
| Opening level | $10.30 |
| Difference | $0.14 |
Profit: $0.14 x 1500 = $210
To calculate the overall result on the transaction you would also have to take into account the commission you have paid and the interest and dividend adjustments. The Detailed Example includes these charges and adjustments.
The PureDeal platform
Trade share CFDs at the guaranteed market price using our browser-based PureDeal platform. PureDeal has a customisable interface, providing simple access to a wide range of markets, including shares, forex, indices, commodities and more. Through PureDeal we also offer a full range of free trading tools and charting packages which provide real-time news and research to help you make informed trading decisions.
Learn about risk
CFDs are a leveraged product, so it is important to understand the risks involved before beginning to trade. Find out more about about types of risk and how to manage them, or if you're ready to start trading CFDs now, you can open an account online in minutes.