Here are answers to some of the questions we are most commonly 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?
CFD trading on shares is a flexible alternative to conventional trading.
When you trade shares as a CFD, you never physically buy or sell the shares. You simply trade the direction in 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 drop.
The degree to which you are correct in your prediction and the size of your position, will dictate how much your profit or loss will be.
For a better understanding of how CFD trading on shares works, take a look at our detailed examples.
How does it differ from conventional share dealing?
The main difference is that CFD share trading is done on a leveraged basis. This means that for the same amount of money, you receive greater exposure to share prices than you would if you had to pay for it outright. With IG Markets, to open your position you simply need to put up a deposit (a fraction of the contract value), which can be as low as 5%.
As CFD share trading is leveraged it can result in dramatic gains, but equally it can result in losses that can exceed your initial deposit. Without good risk management it is possible to make significant losses over a short period of time, which is why we provide a number of risk management tools, such as Guaranteed Stops.
What does 'short-selling' shares as a CFD involve?
Short-selling is an expression which 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), at a higher price than they are able to buy it back later to close the position.
Short-selling is an option with CFD trading that 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 quote, derived from its 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 detailed examples to find out more.
What are the charges?
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 rate for Australian share CFDs is just 0.1%, with a minimum charge of $8.
A funding fee may also be charged that reflects the cost of financing 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 LIBOR) rate plus 2.5% per annum. Funding short positions work in an opposite manner where you will receive interest. 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 IG Markets?
- Greater choice including over 700 Australian shares plus thousands more international equities
- Competitive rates thanks to our unique technology, which means we can offer you the tightest rates available
- Guaranteed Stops available to limit your risk
- Tiered-deposit rates mean we can offer the most attractive margins on liquid stock positions
- Professional-level resources to help support your CFD share trading decisions
- Real-time charting as part of a comprehensive technical analysis pack.
- Award-winning CFD provider: According to the Investment Trends May 2011 Australia CFD report, IG Markets is Australia's number one CFD provider, with 40% of active CFD traders holding a trading account with us.
Learn more about trading share CFDs with our free online seminars.