Spread Betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 56.7% of retail investor accounts lose money when trading Spread Betting and CFDs with this provider. You should consider whether you understand how Spread Betting and CFDs work and whether you can afford to take the high risk of losing your money
A CFD, or Contract for Difference, is a financial instrument that allows traders to speculate on the price movements of a particular asset without actually owning the underlying asset. With a CFD, traders can speculate in both rising and falling markets by entering into a contract with a broker to exchange the difference in the price of the underlying asset between the time the contract is opened and when it is closed.
CFDs are popular trading instruments because they allow traders to leverage their trades, meaning that they can control larger positions with a smaller amount of capital. This can potentially result in higher profits, but it also carries higher risks, as losses can also be magnified.
CFDs are available on a wide range of underlying assets, including equities, indices, commodities, and currencies. They are also highly flexible, as traders can choose the size of their trade, the direction they want to take (i.e., buy or sell), and the duration of the trade.
Overall, CFDs are a powerful trading tool that allows traders to access a wide range of markets and potentially profit from price movements, but they also carry risks that traders should be aware of before entering into a trade.
CFD trading offers several advantages for traders, including:
Overall, CFD trading offers several advantages for traders, but it’s important to remember that it also carries risks. Traders should always do their research and understand the potential risks involved before entering into a CFD trade.
CFD trading carries several risks that traders should be aware of before entering into a trade. Some of these risks include:
Overall, CFD trading can be a powerful tool for traders, but it’s important to remember that it also carries risks. Traders should always understand the risks involved and have a risk management strategy in place before entering into a CFD trade.
CFD trading works by entering into a contract with a broker to exchange the difference in the price of an underlying asset between the time the contract is opened and when it is closed. Here’s how it works:
Here are a few things you may want to consider to find out if CFD may be right for you:
Trading experience: CFD trading can be complex and involves a high level of risk. If you are new to trading or have limited experience, it’s important to do your research and consider starting with a demo account to practice trading strategies.
Trading knowledge: In some cases, even with less previous CFD trading experience, having the right trading knowledge can be helpful. Given how complex and high risk CFD trading can be, it’s important that you assess if you have enough relevant knowledge to help you make informed decisions and manage the risks involved.
Risk tolerance: CFD trading involves a high level of risk, and you should only trade with money that you can afford to lose. If you are risk-averse, CFD trading may not be suitable for you. It’s important to take the time to educate yourself about the markets, trading strategies, and risk management techniques before diving into CFD trading.
Investment goals: CFD trading can be used to speculate on short-term price movements or as a hedging tool in a diversified portfolio. If you are looking for a long-term investment strategy, CFD trading may not be suitable.
Availability of capital: CFD trading involves margin trading, which means you can control a larger position with a smaller amount of capital. However, you should only trade with money that you can afford to lose.
Regulatory environment: CFD trading is subject to regulation in many jurisdictions, and it’s important to choose a reputable broker that is licensed in your country. Spread Co is a UK, FCA regulated broker offering the client protection under its jurisdiction.
Overall, CFD trading can be a powerful tool for traders, but it’s important to understand the risks involved and have a solid trading plan in place before entering into a trade. If you are unsure whether CFD trading is right for you, it’s always a good idea to seek the advice of a financial advisor. We strongly encourage you to practice on our free demo account which can help you develop your skills and gain experience without risking your own funds.
A single positions CFD account is a type of CFD trading account where a trader opens a single position in a specific underlying asset. Unlike a standard CFD account, where traders can open multiple positions in different assets, a single positions CFD account is designed for traders who want to focus on a single trade.
With a single position CFD account, traders can leverage their trade and match their buy and sell trades to determine the settlement of each trade. However, it’s important to note that leveraging a trade also increases the potential risk of losses.
Traders who use a single position CFD account should have a clear trading plan and risk management strategy in place. They should also monitor the market closely and be prepared to close their position if market conditions change.
Overall, a single position CFD account can be a useful tool for traders who want to focus on a specific trade matching for settlement of their trades. However, it’s important to remember that CFD trading carries risks, and traders should only trade with money that they can afford to lose.
In CFD trading, “going long” and “going short” are terms used to describe the direction of a trade.
Going long means buying a CFD with the expectation that the price of the underlying asset will increase. In this case, the trader will profit if the price of the underlying asset rises and will lose money if the price falls.
Going short means selling a CFD with the expectation that the price of the underlying asset will decrease. In this case, the trader will profit if the price of the underlying asset falls and will lose money if the price rises.
Both going long and going short involves opening a position on a CFD, and both trades have the potential for profit or loss based on the movement of the underlying asset’s price.
Traders who go long or short can also use leverage to increase their exposure to the market, potentially increasing their profit or loss. However, it’s important to remember that leverage also increases risk, and traders should use caution when using leverage in CFD trading.
Leverage in CFD trading is the use of borrowed funds to increase the potential return on investment. With leverage, traders can control a larger position in an underlying asset with a smaller amount of capital.
For example, if a trader wants to buy 1,000 CFDs of an equity trading at $10 per share, they would need $10,000 in capital. However, with a leverage of 5:1 or 20%, the trader can control the same position with just $2,000 in capital. This means that if the equity price increases by 10%, the trader would earn a profit of $1,000 instead of $200 for an unleveraged trade.
Leverage is a double-edged sword because while it can increase potential profits, it can also increase potential losses. If the market moves against the trader, they could lose more than their initial investment.
It’s important to note that different CFD brokers offer different levels of leverage, and some regulatory bodies have restrictions on the amount of leverage that can be offered to retail traders. Traders should always use leverage with caution and have a solid risk management plan in place.
The main benefit of leverage in CFD trading is that it allows traders to control larger positions in the market with a smaller amount of capital. This can potentially lead to higher profits as traders are able to take advantage of even small price movements in the underlying asset.
Here are some other benefits of leverage in CFD trading:
It’s important to note, however, that while leverage can increase potential profits, it can also increase potential losses. Traders should always use leverage with caution and have a solid risk management plan in place.
Investing directly in an asset, such as a company share, lets you enjoy the full benefit of any rise in the asset’s value. It’s the same with CFDs but you don’t have to make the same, possibly large, initial outlay to access this potential benefit. This is known as using leverage. Leverage magnifies your potential return – you can make the same profit as a share owner with much lower capital outlay compared with purchasing shares. You should remember that potential losses can be greater than your initial outlay if the asset price doesn’t move in the direction you anticipated. Please view our market information to view leverage by market.
Leverage varies per instrument. Please visit our market information to view the leverage we offer. The level of leverage is dependant on account classification between retail and professional.
CFDs can be used to trade a wide range of assets, including equities, commodities, currencies, and indices. Please click here to see Spread Co’s range of markets.
Trading in most modern investment products involves some sort of commission or management fee — this could be stockbroker fees or fund management charges. High charges will have a greater impact on your profit potential. At Spread Co we charge commission when you trade equities. Our commissions are low, starting from just 0.1% for UK equities and are included in our spreads.
When you trade equities with Spread Co, the commission is included in the spread. We take the market price for the equity and deduct our commission from the bid price, and add it to the offer price. This has the effect of widening the market spread.
“Here’s an example:
Sell: 180.00 — Buy: 180.10
So the market spread is 0.10 (180.10 — 180.00)
Our commission would be 0.05%. This is deducted from the bid price:
180.00 — (180.00 x 0.05%) = 179.91
And added to the offer price:
180.10 + (180.10 x 0.05%) = 180.19
So the trading bid-offer price would be:
179.91 — 180.19
Our spread, including commission in this example is 0.28 (180.19 — 179.91)”
The minimum contract size varies depending on the instrument. Please refer to our market information here.
Financing charges, also known as overnight funding charges, are fees that traders may be charged for holding CFD positions overnight. These charges are applied to positions that are held beyond the end of the trading day, and are typically calculated based on the size of the position and the interest rate applicable to the underlying asset.
When a trader holds a long position overnight, they are effectively borrowing money to finance their position. As a result, they may be charged a financing fee based on the interest rate of the underlying asset. On the other hand, if a trader holds a short position overnight, they may receive a financing credit based on the interest rate.
Financing charges can add up over time and can significantly impact a trader’s profit and loss on a position. It’s important for traders to be aware of these charges and to factor them into their trading strategies.
We offer 0% financing on short index & equity positions. When you go short with a CFD on an cash index or equity position overnight, you won’t pay a penny more with Spread Co. Financing costs for futures contracts are already built into the quoted price and for all other products, we try to keep our charges as competitive as possible. These are subject to daily corporate actions as ex-dividend dates are set and adjusted to the amount of dividend points.
CFD trades typically do not have an expiration date, unlike some other types of financial instruments such as options or futures contracts. As long as the position remains open and the trader has sufficient funds to maintain the position, it can be held up to three years from inception.
However, it’s important to note that CFD Positions are subject to overnight financing charges if they are held open overnight.
It’s also worth noting that some forward contracts that are designed to expire on a specific date or at the end of a specific period. CFD markets which are dated are subject to a forward rollover to the next contract, e.g. US30 Jun to US30 Sep. For further information please see our cost of charges page.
Positions are marked to market daily against appropriate bid/offer on single positions which are open, the Profit & Loss is held as unmatched Profit & Loss and is adjusted daily to the mark-to market of the position closing price, until it is matched off. At this point the unmatched Profit & Loss is settled against the account cash balance. The account valuation net the day Profit & Loss and the Unmatched Profit & Loss for all open positions.
Profits and losses in CFD trading are determined by the difference between the opening and closing price of a position. If a trader buys a CFD and the price of the underlying asset increases, they will make a profit when they sell the CFD. Conversely, if the price of the underlying asset decreases, the trader will experience a loss when they sell the CFD.
Here is an example to illustrate this:
Let’s say a trader buys a cfd on equity XYZ at $50 per cfd, with a contract size of 100 CFD. The trader’s total exposure to the market is $5,000 ($50 per cfd x 100 cfd). If the price of the equity increases to $55 per cfd and the trader decides to close their position, they will have made a profit of $500 (($55 – $50) x 100 cfds), less any associated spread and transaction costs.
On the other hand, if the price of the equity decreases to $45 per cfd and the trader decides to close their position, they will have experienced a loss of $500 (($45 – $50) x 100 cfds), plus less any associated spread and transaction costs.
It’s important to note that CFD trading involves a high level of risk, and traders should always have a solid risk management plan in place to mitigate potential losses. This can include setting stop-loss orders to limit losses on a position and avoiding over-leveraging the account.
You may hold on to your trades for as long as you like (provided your trade is not liquidated). This is subject to a maximum period of three years.
Corporate actions refer to significant events that occur in a publicly-traded company that may affect its equity price, ownership structure, or corporate governance. These actions are initiated by the company’s management and board of directors, and they are subject to regulatory oversight by relevant authorities in the country where the company is based.
Some common examples of corporate actions include:
In summary, corporate actions are significant events that occur in publicly-traded companies and can have a significant impact on their equity price and ownership structure. Investors should be aware of these actions and understand how they may affect their investments.
Where actions occur on the underlying referenced market, the same replication will occur on the CFD position held with us. For more information please see the corporate actions page.
Unfortunately, we do not offer guaranteed stop losses.
Slippage is the difference between your expected order price and that at which the order is executed. Slippage usually occurs during adverse market conditions, and in periods of higher volatility. If you placed a significantly large order, if there isn’t enough volume in the market to maintain your spread, your order will be slipped. This is most likely to occur when the markets are in an abnormal market state and experiencing abnormal volatility. Slippage may also occur during gapping events in circumstances where the market has opened with a price differing to the previous close and the existing order is placed in between these two levels. Referencing stops, the stop would be slipped to the opening price dependant on the position size, in the case of a limit order the order price would be improved to the opening level.
The minimum account maintenance balance is US$100.
‘Account maintenance balance’ is the minimum required amount to hold an open position. This does not mean that you have to have a minimum of $100 in your account at all times, but only when you have open positions.
A margin call is a notification from a broker to a trader that additional funds are required in order to maintain an open position. Margin calls occur when the account balance falls below the required margin level, which is the minimum amount of funds required to maintain an open position.
In CFD trading, margin is the amount of money required to open and maintain a position. Traders are required to maintain a certain margin level, which is a percentage of the total position value. If the margin level falls below a certain threshold, the broker will issue a margin call to the trader, requesting that they deposit additional funds to bring the account balance back up to the required level.
If the trader fails to deposit additional funds, the broker may close out some or all of the trader’s open positions in order to bring the account balance back up to the required margin level. This can result in significant losses for the trader, especially if the market has moved against their positions.
Margin calls are an important aspect of risk management in CFD trading, as they help to ensure that traders do not take on excessive risk and are able to maintain their positions. It’s important for traders to monitor their margin levels and to have a solid risk management plan in place to avoid margin calls and potential losses.
Margin requirements refer to the amount of funds that traders are required to deposit in order to open and maintain positions in CFD trading. Margin is essentially a form of collateral that is required to cover any potential losses that may occur as a result of the trader’s positions.
Professional accounts have increased leverage based on trading experience and asset values. More information can be found here.
Spread Co require traders to maintain a certain margin level, which is expressed as a percentage of the total position value. This percentage can vary depending on the underlying asset being traded, the volatility of the market.
Because you do not have to pay the full amount of your position size, CFDs enable you to increase the amount of exposure to an instrument through leverage. This means you can trade a larger position than if you traded simply using the funds you placed in your account. Leverage has the effect of magnifying the profits or losses on your trading capital. The maximum amount of leverage available to you varies with the instrument you are trading, for example, on equities the margin requirement is typically 20%, so you can trade £20,000 worth of CFDs with just £4,000 in margin. A professional client at 5% would require £1,000 in margin.
It’s important for traders to understand the margin requirements and to maintain sufficient funds in their account to cover their positions. If the margin level falls below a certain threshold, Spread Co will issue a margin call, requesting that the trader deposit additional funds to maintain the required margin level. If the trader fails to do so, we may close out some or all of your positions, potentially resulting in significant losses. The stop out level of position is initiated at the point the account value falls below 50% of the margin required on the account.
The margin requirement for a position is calculated by multiplying the relevant CFD position size by the applicable margin rate:
Margin requirement = (position size) x (margin rate), the margin amount will be calculated in the asset currency and displayed in the account currency.
e.g. If the margin rate for Microsoft (MSFT) is 5% and you buy 1000 MSFT CFDs at $25, then the position size is $25,000 and the margin requirement ($25,000 x 5%) is $1,250.
Please click here for a trading example that explains margins in detail.
If you receive a margin call, it means that the funds in your account have fallen below the required margin level for your open positions. This can occur when the market moves against your positions, causing losses to accumulate.
If you find yourself on a margin call, the first thing you should do is to review your open positions and assess your exposure to potential losses. You should also check the margin requirements for your positions and determine how much additional funds you need to deposit in order to maintain the required margin level.
In order to avoid the risk of liquidation of your positions, it is generally advisable to deposit additional funds into your account as soon as possible. This will allow you to maintain your positions and potentially recover your losses if the market turns in your favour.
If you are unable to deposit additional funds to meet the margin call, you may need to consider closing out some or all of your positions in order to avoid further losses. This can be a difficult decision to make, but it is important to weigh the potential risks and rewards of each option and to have a solid risk management plan in place.
Ultimately, the key to avoiding margin calls and managing your risk in CFD trading is to carefully monitor your positions, maintain sufficient funds in your account, and have a solid risk management plan in place.
When it comes to adding funds after a margin call, please remember that prompt action is crucial, aligned with market conditions. Margin call notifications are linked to your account valuation, so the timing isn’t fixed. Depositing funds promptly can help restore your account balance to the required level, providing support for your trades. Please keep in mind that monitoring your positions is your responsibility.
If you fail to top up your account when you are on a margin call, Spread Co may close out some or all of your positions in order to meet the required margin level. This is known as liquidation, and it can result in significant losses for the trader.
Spread Co will close out the position that has the largest margin position first and so on, up to the point the account is no longer in Margin call.
In the event the account only holds a position in one market, the position may be closed in partial to take the account out of margin call. For example, if the account is holding 50 UK100 long, on liquidation the account could be closed out of 30 leaving a position of 20 depending on the cash on the account.
Liquidation can be a traumatic experience for traders, as it can result in the loss of all or most of their funds in the account. To avoid the risk of liquidation, it is important for traders to monitor their positions carefully, maintain sufficient funds in their account, and have a solid risk management plan in place.
In summary, if you don’t top up your account when you are on margin call, Spread Co may close out your positions, potentially resulting in significant losses. Therefore, it is important to take immediate action when you receive a margin call and to ensure that you have sufficient funds in your account to cover your positions.
If you’re currently long (with a buy position), make sure you’re looking at the bid chart (you can change the chart type in the chart itself). If you’re short (with a sell position), you will need to look at the offer chart. If you still feel the stop loss should have been executed, please contact our client services team on +44 (0)1923 832682 or email us at email@example.com.
Your profit and loss will always be calculated based on the difference between your open price and close price multiplied by the quantity. Profit and loss on CFD trading accounts is calculated in the currency where the product is domiciled and then converted into your account currency. For example, if you traded on Nasdaq 100, your profit and loss will be booked in USD and displayed in GBP if the account currency is GBP and is valued real-time using the GBPUSD rate. If you still face issues, please contact our client services team on +44 (0)1923 832682 or email us at firstname.lastname@example.org.
Liquidation in CFD trading refers to the process of closing out a trader’s open positions when they no longer have sufficient funds in their account to meet the margin requirements for those positions.
The liquidation will create a new liquidation trade thereby reducing the open position to zero. The new open position (liquidation trade) is added to the open position list on the open position blotter along with the original trade. Open positions which create zero exposure are not matched. This is left to the discretion of the position holders.
The fundamental purpose of Single Position accounts is to allow the position holders to manually select the open positions they want to take profits/losses on, as opposed to the trading platform automatically matching corresponding open positions in the same instrument.~
In the event the account only holds a position in one market and where the position may be closed in partial to take the account out of margin call. For example if the account is holding 50 UK100 long, on liquidation the account could be closed out of 30 leaving a position of 20 depending on the cash on the account.
Liquidation can be a stressful and emotional experience for traders, as it often results in significant losses. To avoid the risk of liquidation, traders should monitor their positions closely and ensure that they have sufficient funds in their account to cover their margin requirements. They should also have a solid risk management plan in place to help manage their exposure to potential losses.
Your trading account is subjected to a liquidation process if your account valuation falls below a percentage of the margin requirement (liquidation level) which is required to support your open positions.
The liquidation process will stop only when your account equity is more than the margin requirement on your remaining positions. Each position is liquidated in full, the final remaining net position will be partially closed where possible, leaving the account out of margin call.
The open positions with the largest margin requirement will be liquidated first.
No you will not be charged extra if you get liquidated, the closing spread cost is applied as normal if closing a position at market. Liquidation can occur during volatile markets, in such cases the risk of stop out are with increased slippage due to the underlying market conditions.
“Cash” is your brought forward cash balance +/- realised P&L.
“Equity”/ “Account valuation” is “Cash” +/- “Open P&L” +/- “Unmatched P&L”.
“P&L Day” displays the real-time unrealised profit/loss of your open trades based on the day open price (The difference between the current price and the day open price multiplied by “Quantity”). The profits or losses are expressed in the traded instruments currency.
“P&L Total” displays the real-time unrealised profit/loss of your open trades based on the trade open price (The difference between current price and trade open price multiplied by “Quantity”). The profits or losses are expressed in the traded instruments currency.
Unmatched P&L (Profit and Loss) is a term used in CFD trading to refer to the unrealized profits or losses on open positions that have not yet been closed out. In other words, unmatched P&L represents the current value of a trader’s open positions relative to their entry price.
For example, if a trader buys 100 CFDs of a equity at $50 per CFD and the current market price is $55 per CFD, the trader’s unmatched P&L would be $500 (100 cfds x $5 difference between entry and current price). If the market price falls to $48 per CFD, the trader’s unmatched P&L would be a loss of $200 (100 shares x $2 difference between entry and current price).
Unmatched P&L is important for traders to monitor, as it can have a significant impact on their account balance and margin requirements. Traders should keep track of their unmatched P&L and take appropriate action to manage their risk, such as setting stop-loss orders or taking profits on profitable trades.
Day P&L is the profit on the current business day, where a position has been brought forward from the previous business day closing price, the unmatched P&L for teh day will be tracked by the Day P&L.
Matching is a term used in CFD trading to refer to the process of closing out an open position by selling or buying an equivalent position in the same instrument. The goal of matching is to offset the trader’s exposure to the market and realize any profits or losses associated with the trade.
The fundamental purpose of single position accounts is to allow position holder to manually select the open positions they want to take profits/losses on as opposed to the trading platform automatically matching corresponding open positions in the same instrument. The act of manually selecting trades to close off against each other is called matching. The benefit is to match off two single or multiple position against one, without having to pay the spread to close individually.
Matching is a crucial part of CFD trading, as it allows traders to manage their risk and control their exposure to the market. By matching their positions, traders can minimize their losses and take profits on profitable trades. It is important for traders to monitor their open positions and match them when appropriate, in order to avoid unwanted losses or excessive margin requirements.
The ‘Open’ price is the average price that you entered into the position.
Example of ‘Open’ price calculation on a Single CFD account
Customer A conducted 3 USDJPY trades on Day 1:
• Trade 1: Buy 200,000 USDJPY @ 110.50
• Trade 2: Buy 100,000 USDJPY @ 110.40
• Trade 3: Sell 100,000 USDJPY @ 110.60
The net position is 200,000 and can be traded with a sell and then matched off without paying the closing spread on the existing open positions”
“‘Day Open’ price is the previous day’s close price for positions held overnight, and the trade price for positions opened on the current business day. It is the price used to calculate the P&L you are making on the current business day.
Example of “Day Open” price calculation on a Single CFD account
Customer B conducted 3 USDJPY trades on Day 1 and market closed at 110.70:
• Trade 1: Buy 200,000 USDJPY @ 110.50
• Trade 2: Buy 100,000 USDJPY @ 110.40
• Trade 3: Sell 100,000 USDJPY @ 110.60
On Day 2 the market is trading at 110.80, so the day P&L on each position would be 110.80-110.70 = 0.10 Profit”
If you have any questions that aren’t covered on this page, or if you just need our assistance please call us on +44 (0)1923 832682, email us at email@example.com or contact us using the ‘Live Chat’ feature on the platform.
With our platforms you can trade wherever you are – at home, in the office, or when you’re out and about.
Some companies will charge you to hold a short index position. At Spread Co we won’t.
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