Here are answers to some of the most frequent questions we are asked about CFD trading on shares. If you can't find what you're looking for here, please refer to the contract details.
How does share CFD trading work?
Share CFD trading lets you go long or short a stock without owning the physical share. Our Share CFDs are designed to reflect actual share trading as closely as possible.
When you trade shares as a CFD, you do not physically buy or sell the stocks. You simply open a position on the direction which you think the share price will move. So you ‘buy’ a position if you think the price of a share is set to rise, and 'sell' if you think the price will fall.
The extent to which you are correct in your prediction, and the size of your position, dictate the level of your profit or loss.
For a better understanding of how Share CFD trading works, take a look at our detailed examples.
How do CFDs differ from conventional share dealing?
The primary difference is that CFDs are traded on margin. This means that for the same amount of investment, you receive greater exposure to share price movements than you would if you had to pay for the shares outright. With IG, to open your position you simply need to put up a deposit (a fraction of the contract value), usually as low as 10%.
As share CFD trading is leveraged it can result in dramatic gains, but equally it can result in losses that can exceed your initial deposit. However, buying a Share CFD will never result in losses greater than if you had bought the share using conventional trading. Good risk management can help prevent you losing more than your initial deposit, which is why we provide a number of risk management tools, such as Guaranteed Stops. A Guaranteed Stop puts an absolute limit on any potential loss from a trade. As such, there is a small premium to pay for using Guaranteed Stops.
Please note that trading CFDs is a geared investment strategy, carrying a high risk to your capital. Only trade with money you can afford to lose. Please see our Risk Disclosure Notice for more details.
What does 'short-selling' shares as a CFD involve?
The term 'short-selling' describes the process of a trader attempting to profit from the fall of an individual share price. To be successful the trader must first sell the share (open a position), with the intention of buying it back later (closing the position) at a lower price.
Short-selling is yet another reason why CFD trading is more flexible than conventional trading. CFD trading allows you to potentially profit from a falling share price as easily as from a rising one.
If you think the price of a particular share is set to fall, you simply 'sell' at our current CFD quote, derived from the share's market price. This will give you a 'short' position in your chosen share, and you will be able to close that position by 'buying' at our quote later on.
Take a look at our short-selling example to find out more.
What are the charges for Share CFDs?
When trading a Share CFD you will pay a commission, which is calculated as a percentage of the value of your transaction. Our standard commission rates for Singapore Share CFDs is just 0.1%, and start from 0.1% for international shares.
A financing fee may also be charged that reflects the cost of funding any long position that you hold overnight, having only put down a fraction of the value as a deposit. The financing is charged at the risk-free (or SIBOR) rate plus 2.5% per annum. Funding short positions works in an opposite manner where you will receive interest, provided the relevant interbank rate (eg SIBOR) is higher than 2.5%. If you are short-selling there may be a daily charge for us borrowing the shares to sell short for the period the position is open.
For our Guaranteed Stops, there is a one-off extra charge, in effect an insurance premium, for this Limited Risk protection. In most cases this is just 0.3% of the underlying transaction value. Non-guaranteed Stops and Trailing Stops are free of charge.
For further details, see our competitive rates page.
WHY TRADE SHARE CFDs WITH US?
- Greater choice, including over 300 Singapore shares plus thousands more international equities
- Guaranteed market prices on all Share CFDs - there is no added spread on Share CFDs, and we are not a market maker
- Guaranteed stops available to put an absolute limit on your risk
- Tiered Margin rates mean we can offer the most attractive margins on liquid stock positions
- Lower prices than primary exchanges thanks to MTFs, which offer greater liquidity on US and European stocks
- Professional resources to help support your share CFD trading decisions
- Real-time charting as part of a comprehensive technical analysis pack.
Learn more about trading Share CFDs with our free online seminars.
CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial investment, so please ensure that you fully understand the risks involved.