Equity CFDs are CFDs that mirror the price movement of the underlying share or stock on a listed stock exchange. They are among the most popular CFD instruments and for most traders are the first step in the natural progression from share trading into CFD trading.
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How Equity CFDs work
The concept of equity CFDs is simple. An equity CFD trader buys or sells a CFD over any equity listed on a stock exchange and receives the difference between the opening and closing price of the contract. CFDs are a leverage product, therefore a CFD trader gets the additional benefit of outlaying only a portion of the capital, and can also short sell stocks on various exchanges to profit from falling markets.
Here’s an example: a trader wants to invest in VOD. If the trader believes the price of VOD will rise, they can buy a parcel of VOD CFDs but only have to outlay a 5% margin requirement of the full notional value of the position. As VOD reaches the desired price, the trader would simply sell the same position, leaving the CFD trader with all the profits gained from that position less financing charges and commission.
DMA Equity CFDs
FP Markets offers its clients access to Direct Market Access (DMA) equity CFDs. Unlike most CFD providers, with FP Markets, there is no adjustment of prices, no middle man and no delays on transactions which can result in re-quoted prices. Clients have access to prices which are based exactly on market values.
As a result, our clients can access the full market depth, buy and sell orders in the market for stocks they choose, and participate in being a price maker, not just a price taker. DMA gives traders the ability to participate in opening and closing market auctions— this allows traders to take advantage of the opening and closing prices of a stock. DMA equity CFDs also means traders can access volumes in markets to confirm their trades — this will help with your trading strategies.
Through Direct Market Access, FP Markets offers its traders access to market liquidity. One hundred per cent of all trades are hedged in the underlying market; this means traders have complete transparency. Traders can see the volumes available at each price step and can decide whether or not to participate without being re-quoted.