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A CFD, also known as a Contract for Difference, is an agreement to exchange the price difference of an asset between the time a contract is opened and the time it is closed. CFD trading is very similar to share trading, although also has several differences. CFDs also allow the flexibility of buying long and selling short on the market, allowing traders to profit when the market rises and when it falls.
CFDs are traded on leverage to give you more trading power, flexibility and opportunities. At position opening, a “deposit” or margin is paid in order to control the position. Margins for Australian shares start at 5%, which allows up to 20 times leverage of your initial trading capital.
CFDs can be used to trade an extremely wide range of financial products on a variety of global markets they are an easy way to start dealing on a number of global markets.
Long Share CFD positions are adjusted to reflect cash dividends paid on the underlying share, as you would if you owned the physical share. However with a CFD you are not entitled to any voting rights or franking credits. Note that for short CFD position you account will be debited for any dividends plus the amount of any franking credits.
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