How to trade CFDs

Explore how CFD trading works – from opening an account to closing your position.

When you trade CFDs, you go long a certain number of CFD contracts on a market if you expect it to rise, and go short if you expect it to fall. But the finer details of CFD trading can often be a little more complicated – especially since platforms and functionality vary from provider to provider.
Here are the four steps you’ll need to follow to start CFD trading. To learn everything you need to know about placing your first CFD trade, take a look at our guide below.
  1. Create and fund an account
  2. Find an opportunity
  3. Open a position
  4. Monitor and close a position

1. Create and fund an account

Applying for a CFD trading account is a straightforward process, and usually takes just a few minutes to complete.

Once the details you provide have been verified, you’ll need to fund your account by a minimum amount. With IG, you can add funds via credit or debit card, bank transfer and bill payments.

If you’d prefer to build your market confidence in a completely risk-free environment, you can open a demo account and practise with $200,000 of virtual funds.

2. Find an opportunity

Once you’ve opened and funded your account, it’s time to find your first trade. With IG, you’ll be able to go long and short on over 15,000 markets, including:
With so many markets to choose from, identifying your first trade can often seem daunting. That’s why we offer a range of tools and resources to help you decide on the trade that’s right for you:
  • Spot market moves at a glance with our essential charts, and interpret what they mean using our range of technical analysis tools
  • Upgrade to our advanced ProRealTime charting package and gain access to automated trading, as well as even more indicators. It’s free to use if you transact at least four times in a given month, otherwise there’s a $60 per month fee*
  • Respond instantly to key market moves with alerts, which can be set to trigger when the market hits a certain level or moves by a set amount
  • Learn from our team of market experts with up-to-the-minute analysis and live video, as they explore emerging patterns and trends worth watching
  • Access a real-time Reuters feed in the platform, and filter the latest news stories by market, article type and more
  • Be alerted to key trends and potential opportunities and explore concise, actionable analysis with third-party signals
  • View our economic calendar and gain a full overview of macro and microeconomic events with the potential to move markets
  • Review dedicated market data for a breakdown of trader sentiment, the latest company figures and real-time streaming prices
  • Identify shares you may want to trade with the market screener, according to company fundamentals, location, sector and more

3. Open a position

When you’ve decided which market you want to trade, you’re ready to place a deal. The first thing to decide when placing a deal is whether you want to go long or short. Say, for example, that you want to trade the FTSE 100. If you think its value will fall, you sell (or go short); if you think it will climb, you buy (or go long).

When opening a position, there are a few things to keep in mind:

Buy and sell prices

You’re always offered two prices based on the value of the underlying instrument you are dealing: the buy price (the bid), and the sell price (the offer).

The price to buy will always be higher than the current underlying value, and the price to sell will always be lower. The difference between the two prices is called the spread. Most trades with IG are charged via the spread, with the exception of shares, which incur commission.

Number of contracts

When trading CFDs, you need to decide how many contracts you want to trade. Each market has its own minimum number of contracts: the FTSE’s, for instance, is one contract.

In this case, one contract is equivalent to £10 per point, but this also varies from market to market. £10 per point means you’ll make or lose £10 for every point of movement in the value of the index. We also offer mini contracts on key markets, giving you more flexibility over the sizes you trade in.

Keep in mind that as CFDs are leveraged products, you only ever need to put down a small deposit to gain exposure to the full value of the trade. This means your capital goes further, but also means that you could lose more than your initial outlay.

Stops and limits

To help restrict your potential losses, you might choose to add a stop. Stops automatically close your position when the market moves against you by a certain amount. You can choose from a number of different types of stop, including:

  • Basic: Closes you out as near as possible to the price level you specify. A basic stop may be affected by ‘gapping’ overnight or in times of high volatility
  • Guaranteed: Closes you out at the level you requested, regardless of whether the market gaps. This will incur a small premium, but only if the stop is triggered
  • Trailing: Moves with your position when the market moves in your favour, but locks in as soon as the market starts to move against you

Limits, meanwhile, do the opposite, closing your position when the market moves a certain distance in your favour. Limits are a great way to secure profits in volatile markets. 

Explore the markets with our free course

Discover the range of markets you can trade on – and learn how they work – with IG Academy’s online course.

4. Monitor and close a position

Once you’ve taken your position, your profit or loss will fluctuate in line with the underlying market price. You can monitor all your open positions in real time on the trading platform, as well as edit your stops and limits and respond to new signals.

When you’re ready to take your profit or cut your losses, you can do so manually by placing the same trade you originally placed, but in the opposite direction. So if you opened your position by buying, you’d close by selling the same amount of contracts at the sell price – and vice versa. 

Your profit or loss is calculated by multiplying the amount the market moved by the size of your trade in pounds per point. Here’s an illustrated example of how this works:

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* We reserve the right to charge you for the service if your qualifying trades are of an extremely low value.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

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