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Contracts for difference |
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Contracts for differenceCFDs are a derivative product designed for active traders who want to have extra leverage in their share trading.Instead of paying for purchases in full, they deposit a 'margin' with their broker (typically 20% of the total purchase value) and that margin requirement goes up and down in line with the rise and fall of their portfolio. In effect, the investor is able to speculate with much more money that he actually has by borrowing from his broker and using the shares he has bought as collateral. If his investments perform well, he can get rich quicker than if he was not trading on margin. If they perform badly, the broker will demand more margin payments which have to be paid in cash, and the investor may lose significant amounts.Contracts for differences, or margin trading, are risky, and not for novice investors. Most brokers do not offer a CFD service, and the market is dominated by a handful of brokers who specialise in this area. Margin requirements vary, and most brokers will ask for a deposit of £10,000 before allowing a new client to trade on margin.Similar MatchesDifference checkDifference checkThe difference in interest payments that is paid to a swap counterparty to close out a deal. Scitovszky indifference curveScitovszky indifference curveAn indifference curve for a group of individuals representing the minimum needed to keep all of them at given levels of utility. A well-behaved family of such indifference curves is defined holding utilities of all but one individual constant and varying only the one. These are useful in discussing the gains from trade. Due to Scitovszky (1942). Technological differenceTechnological differenceA difference in production functions, usually for the same industry compared between two countries, such that one country has higher output for any given input than the other. Social indifference curveSocial indifference curveA curve showing the combinations of goods that, when available to a country, yield the same level of social welfare. Indifference curveIndifference curveA means of representing the preferences and well being of consumers. Formally, it is a curve representing the combinations of arguments in a utility function that yield a given level of utility. Further SuggestionsCommunity indifference curveTrade indifference curve |
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