How to Trade CFDs

Find out more about Contract for Difference (CFD) trading with City Index.

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How to place a CFD trade

Take advantage of leveraged trading and gain access to thousands of instruments, some trading 24 hours a day, to build your investment portfolio.

 

CFD trading steps

  • Choose a market
    Decide which market to focus on and use our fundamental and technical analysis research portal to plan your next trade
  • Decide to buy or sell
    Click 'buy' if you think the price will increase in value or 'sell' if you think the market will fall in value
  • Select your trade size
    Choose how many CFDs you want to trade. 1 CFD is the equivalent to 1 physical share in equity trades
  • Add a stop loss
    A stop loss is an order to close your position out at a certain price if it moves too far against you
  • Monitor and close your trade
    Once you have placed your trade, you will see your profit/loss update in real time at the top of the screen. You can exit your trade by clicking the close trade button

CFD trading explained

Choosing a market

At City Index, we offer CFDs on thousands of financial markets, from Shares, Indices and Forex to Commodities, Bonds and more. You have instant access to all the major tradable markets across the UK, US, Europe, Asia, Australia & New Zealand.

With so many instruments to choose from, it’s a good idea to make use of the research tools provided on the trading platform so you can more quickly identify trading opportunities that match your trading style.

Use the search function on the platform or app to search and select your market. Learn more about our technical analysis tools.

Trade

EUR/USD

Spread: 0.5pts


Decide to buy (go long) or sell (go short)

Once you’ve chosen a market, you need to know the current price. You can find this by bringing up a trading ticket on the platform.

The price of any CFD is based on the price of the underlying instrument. The first price quoted on the trading ticket is the sell price (the bid), and the second price is the buy price (the offer). The difference between the two is known as the spread.

If you believe a market price will go up, you buy that market (known as going long). If you believe it will fall, you sell the market (going short).

Select your trade size

With CFD trading you select the number of CFDs you wish to trade.

With equity trades, 1 CFD is equivalent to 1 share. When trading Indices, FX, Commodities, Bonds or interest rates, the value of 1 CFD varies depending on the instrument. You can see which number you are trading on by looking up the 'tick value' in the instrument's market information sheets. CFDs are traded in the base currency of the market.

CFD trading is a leveraged product which means you only need to have a small percentage of the overall trade value, known as margin, in your account in order to open the trade. Generally speaking, the larger the value of your trade, the more margin required. It is important that you have sufficient funds in the account to place the trade. The margin calculator in the trading platform will automatically calculate your initial margin for you.

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Add stop and limit orders

Before you place your trade, it's important to consider your risk management strategy.

A basic risk management task is to place a stop loss order that will be closed when price reaches a certain level (moving against your position). As the name suggests, this will be at a price below the current market level if you are long, and above if you are short, and it will be triggered on losing trades to help minimise losses.

Stop loss on CFD trade


A limit order is an instruction to close out a trade at a price that is better than the current market level and is used to help lock in profit targets.

Standard stop losses and limit orders are free to place and can be set up in the dealing ticket when you first place your trade, or once your trade is open.

Monitor your trade

Having placed your trade and any stops or limits, the profit and loss of your CFD trade will now fluctuate with each move in the market price.

You can track market prices, see your profit/loss update in real time and add new trades or close existing trades from your desktop or by using our trading app on your smartphone or tablet.

Closing your trade

Once you are ready to close your trade, select the 'close position' option within the ‘Positions’ window.

By closing the trade, your net open profit and loss will be realised and show up in your account cash balance.

CFD examples

Review the CFD trading examples to see how CFD trading works in practice.

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