0 Questions
Study Notes
- A contract for difference (CFD) is a financial instrument that derives its price from the value of other types of investment instruments.
- Instead of physically trading the financial asset, CFDs represent an agreement between two parties to exchange money based on the underlying asset's value change between the time the transaction is opened and closed.
- CFDs are used to speculate on the movement of underlying financial assets and are often used in markets such as stocks.
- CFDs are available in several countries, including the UK, Netherlands, Poland, Portugal, Germany, Switzerland, Italy, Singapore, South Africa, Australia, Sweden, France, Ireland, Japan, and Spain.
- CFDs were first developed in the UK in 1974 and were initially used by hedge funds and institutional investors to protect their equity exposure on the London Stock Market.
- CFDs are different from Financial Transmission Rights (FTR) in that they are usually defined with a specific position rather than a pair of positions and are not traded through regional transmission organizations (RTO).
- Hedge funds and other asset managers use CFDs as an alternative to physical shares to avoid taxes.
- Retail trading of CFDs began in the late 1990s, with companies like GNI, IG Markets, and CMC Markets offering innovative online platforms for real-time trading.
- CFDs are often used for their leverage, which allows investors to apply leverage to any underlying asset.
- CFDs are available in most European countries, Australia, Canada, Israel, Turkey, Japan, Hong Kong, Singapore, South Africa, New Zealand, and elsewhere, but are not allowed in the United States due to their high-risk nature. I'm sorry, but the text provided is not enough to generate a summary. Please provide a longer text or more information.
- Stop loss orders are used in CFD trading to limit losses.
- DMA providers receive stop loss orders via phone or online and execute them within a limited price range.
- If the stop loss is triggered but there is not enough liquidity, the order may not be executed.
- Market makers can manage stop losses and close positions at available prices and quantities.
- Stop loss orders are just reference prices and may not be executed if the market price is not suitable.
- Guaranteed Stop Loss Orders (GSLO) are offered by some CFD providers for a fee.
- GSLOs guarantee the activation of a stop loss order at a specific price set by the trader.
- CFD trading is usually managed by brokers or market makers.
- CFD providers define contract terms, margin rates, and available financial instruments for trading.
- CFD trading can occur under two different models that may affect the prices of the underlying instruments.
Test your knowledge on the world of Contract for Difference (CFD) trading with this quiz. From the basics of what a CFD is to the use of stop loss orders and the different trading models, this quiz covers essential information for anyone interested in CFD trading. Sharpen your skills and learn about the intricacies of this financial instrument with this informative and engaging quiz.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
