How to Trade CFDs

  • CFDs are a way of trading the price movements of global financial markets without buying or selling the underlying instrument directly. 

    CFDs can be used to speculate on rising as well as falling prices, thus offering a flexible alternative to traditional trading. When trading CFDs, you simply place a trade with a CFD provider such as City Index on the instrument of your choice.  

    At City Index, we offer access to over 5,000 instruments including indices, equities and currencies. The price of our CFD markets replicates the price of the underlying asset, giving you a profit (or loss) in line with any upward or downward movement in the price of the underlying market. 

    All share CFD markets are charged a small commission for each trade that you place with us. At City Index, we charge a commission rate of 0.08% (minimum SGD10) on all SGD share CFDs. For all non SGD shares, we charge a minimum commission rate of 0.05% or JPY1000 for JP shares, 0.08% or A$5 for AU shares and 0.15% or HK$15 for HKD shares. Our commission per US share CFD trade is just 1.5 US cents, with a minimum payable amount of USD15. Non-equity markets are commission-free but incur a widened spread. 

    Find out more about our financing and charges. All our CFDs are traded in the currency of the underlying market.

    How do CFDs work?

    As with traditional share dealing, CFD prices are quoted as a Bid (the price at which you can sell) and Offer (the price at which you can buy). CFDs are traded on margin (also known as leverage), which means that to open a position you need to deposit a small fraction of the full value of your trade, known as initial margin. The initial margin required varies across different markets though would typically be between 10%-25% for an equity CFD trade and between 2%-5% for an index or currency trade.

    CFD trading therefore offers the possibility of a much better return on your initial investment than paying for the trade in full. Conversely, potential losses are also amplified and if the price of the underlying asset goes the wrong way, you stand to make a larger proportionate loss than if you owned the asset directly.

    CFD trading example

    CFD trading is straightforward – if you think a market will rise you buy (go 'long'), and if you think it will fall you sell (go 'short').

    The following worked examples show how you can use CFDs to trade a number of different markets. These examples show trades that result in both profits and losses.

    1)  CFD Equity Trade: Buying Singapore Airlines

    You believe that Singapore Airlines’ shares will rise over the coming weeks as the company is set to report a bumper set of earnings, so you decide to buy a 2,000 CFDs.
    City Index quotes you a spread of 10.48/10.49 for Singapore Airlines.

    Opening trade:

    Price of Singapore Airlines (SGD)  10.49
    Equivalent number of underlying shares  2000
    Value of total position (SGD) 20,980.00
    Commission @ 0.08% 16.78
    Margin requirement @ 10% (SGD)   2098.00

    You were right, and the share price of Singapore Airlines rose. Three days later you decide to lock in your profits and close the trade.

    Closing trade (3 days later):

    Price of Singapore Airlines (SGD) 14.10
    Equivalent number of underlying shares 2000
    Value of total position (SGD) 28,200.00
    Commission @ 0.08% 22.56



    Profit on trade:

    Closing value (SGD) 28,200.00
    Opening value (SGD) 20,980.00
    Profit (SGD) 7,220
    Total Commission (SGD) (39.34)
    Overall profit on trade (SGD) 7,180.66

                                             
    The above trade equates to a 342% profit on the initial outlay (7200/2098), given a share price movement of 3.4%.

    As you hold a long position financing will be automatically debited from your account every night for the period that you hold your position.

    Financing is calculated as a percentage of the value of your position, and is charged daily and applied overnight. Further information on financing can be found by clicking on the Market Information icon located on our Trading Platform.  

    2) Selling the US SP 500 Index
    You believe that the US SP 500 Index will fall as you expect the forthcoming US earnings season to disappoint, so you decide to sell 50 CFDs.

    City Index quotes you a spread of 1190/1190.5 for the US SP 500.

    Opening trade:

    Price of US SP 500 (US$) 1190
    Equivalent number of underlying contracts 50
    Value of position (US$) 59,500
    Commission n/a
    Margin requirement @ 5% (US$) 2975.50


    After 20 days the market has actually risen after a relatively strong start to company earnings season and so you decide to close your position to limit any further losses.

    Closing trade:

    Price of US SP 500 (US$) 1205
    Equivalent number of underlying contracts  50
    Value of position (US$) 60,250


    Loss on trade:

    Opening value (US$) 59,500
    Closing value (US$) 60,250
    Loss on position (US$) (750.00)
    Commission  n/a

    The above trade equates to a 25% loss on the initial outlay (750/2975), given a price movement of a little over 1%.

    As you held a short position financing would also have been automatically credited to your account every night for the period that you held your position open.

    Financing is calculated as a percentage of the value of your position, and is charged daily and applied overnight. Further information on financing can be found by click on the market information icon located on our Trading Platform.

  • Any Questions?

    Help and Support