What are index CFDs?
A contract for difference (CFD) is a contract under which the parties agree to exchange the cash difference between the opening value and the closing value of the contract. Index CFDs are over-the-counter contracts that give you exposure to price movements of the underlying Index. Like other derivatives, CFDs allow investors to participate in the returns from movements in the underlying Index, without actually owning it. You can trade Index CFDs on the MT4 trading platform, including US Indices, European Indices, Asian Indices and the Australian 200 Index. You can use Index CFDs to speculate on market movements or to hedge your existing share portfolio.
Features of Indices CFDs
Trading With Leverage
CFDs are leveraged contracts, which means a small price movement in the underlying asset on which they are based can result in substantially magnified profits or losses, exceeding your investment. Leverage allows investors to take larger exposures, however it similarly makes them susceptible to larger losses.
Go long or go short
You can trade either directions with CFD. Indices CFDs are OTC products, you are trading with the OTC product issuer OANDA. If you anticipate the market will go up, you can go long with the index CFD. If you think the market will go down, you can short the index CFD.
Indices CFDs trading are commission free. However, you do need to pay the spread charge. The spread is the difference between buy price and sell price. If you hold your CFD positions overnight, you will also be charged daily holding interest.
Trading in CFDs and other OTC derivatives entails risk and is not suitable for investors who are not trading with risk capital (money you can afford to lose). CFDs are cash-settled and provide exposure to price movements in the underlying instrument, rather than ownership or physical delivery of the underlying instrument. Please ensure you obtain independent professional advice before investing in CFDs, and read our Financial Services Guide, and the issuer’s Product Disclosure Statement to ensure you understand the key risks and costs associated therewith. Please click here for further information regarding the risks.