What is CFD Trading?

LONDON, July 19, 2011 /PRNewswire/ --

CFD trading (http://www.cityindex.co.uk/cfd-trading/) allows you to speculate on the price movements of financial markets without ever owning the underlying instrument. It is a leveraged product, so you can trade by paying only a small fraction of the actual value of thecontract. This magnifies both your profits and losses: indeed, CFD trading losses can exceed your initial deposit.

An advantage of CFDs over other forms of trading is that they allow you to short sell and therefore profit from falling market prices. This means investors often employ them to hedge their portfolios. Joshua Raymond, Chief Market Strategist of City Index (http://www.cityindex.co.uk/), states: "If you feel that share prices may be set for a fall, by using CFDs to hedge against an existing share position that you may hold, you can protect your overall profits or losses from deteriorating.

"For example, if you held shares in Vodafone and it was due to announce its third quarter earnings whilst you were on holiday and unable to react, you could short sell the equivalent value in a Vodafone CFD to protect yourself in case their earnings disappointed and caused share prices to fall."

Unlike financial spread betting, a similar trading method, CFD trading is monetised in the underlying market currency. This means if you trade CFDs on a US exchange, then your profits or losses will be realised in US dollars. Another contrast between the two is that any CFD trading gains you may make incur UK Capital Gains Tax, which spread betting gains do not*. However, in contrast any CFD trading losses you make may be used to offset CGT.

Learn more about CFD trading at:

http://www.cityindex.co.uk/cfd-trading/what-is-cfd-trading.aspx

Experience CFD trading without risking your own money, with a free City Index demo trading account. Find out more at:

http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

*Spread betting and CFD trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, contracts for difference and, in the UK, spread betting.

We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Learn more at http://www.cityindex.co.uk/cfd-trading/

SOURCE City Index

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