Contract for Difference

A Contract for Difference (CFD) is a leveraged agreement between you and Velocity Trade to exchange the difference in value of an underlying instrument such as a share, commodity or index.

The benefit of CFDs is that it doesn’t matter if the market conditions are up or down since you can still profit in a poor market condition by taking a short position on a weakening index, share or commodity.

To trade CFDs, you only need to put up a small margin to get a large position on the market, meaning your losses or profits are multiplied. Margin percentages are as small as 0.5% for the most liquid instruments. CFDs allow you to make money even when the market falls by taking ‘short’ positions. This is because the contract simply pays the difference between the opening and closing price and there is no physical ownership, complex settlement or broker and admin fees. So, no matter which way the market moves, CFDs allow you to take advantage of these movements.
 

Why trade CFDs?

1. Get fast access to global assets without leaving your computer.
2. Beat the system: Take advantage of good or bad market conditions: for example you can profit when the price of oil rises and when it falls.
3. Our trading platform only requires you to put up a small amount of money to get a large position to take advantage of price fluctuations.

Why trade CFDs with us?

1. Our 100% DMA model allows you to get access to wholesale stock market, derivative market or commodity market rates with no interference from us.
2. Our advanced trading platform gives you all the tools and charts you need to successfully trade CFDs and monitor and identify market patterns.
3. You control your trades.
4. We do not run our own trading book or trade against you; our DMA model means we hedge all your positions and pass them immediately and directly into the market when you make a trade.
5. 24-hour support from market open (Monday 8am NZ) to market close (Friday 5pm NYC)

How it works:

You enter into a CFD by opening a position on the trading platform and putting up an initial margin. This represents collateral for your exposure under the CFD transaction and covers the risk to Velocity Trade, with the margin requirement varying depending on the liquidity and volatility of the underlying instrument.

If you believe the price of an instrument will increase in the future, you would take a long position and “buy” a CFD at the offer price with the intention of selling it later at a higher price. If you think the price of an instrument will decrease in the future, you would go short and “sell” a CFD at the bid price with the intention of buying it back later at a lower price.

CFD Transactions are cash-settled or closed by taking an offsetting opposite position. The profit or loss of the CFD Transaction is either credited to your trading account if the value of the CFD has moved in your favour, or alternatively debited from your account.

Before you decide to trade Margin FX & CFDs, please read our full Product Disclosure Statement (Margin) and make sure you understand the possible risks involved. Margin trading can result in both significant gains and significant losses that are substantially more than your initial investment and any margin payments.