Contents:

Preface Introduction Brief overview of the history of CFDs, and the size of the market today What is a CFD? What range of CFDs are available? Describe how financial markets are developing and the opportunities open to a range of investors, retail and professional, with regard to CFD trading How has the business of investing and trading changed in the last few years to enable CFD customers to access electronic markets directly? What are the opportunities and challenges now presenting themselves to various market operators with regard to trading CFDs? The Principles of CFDs Why have CFDs become a very popular trading instrument? Leverage, shorting and hedging How are CFDs Priced? What is the difference between trading CFDs and shares? What is the difference between trading CFDs and spreadbetting? How does CFD leverage work? The Mechanics of Trading CFDs How does a customer gain access to various online CFD trading venues? Direct Market Access (DMA) Market maker quoting Broker Intermediation Trading Software What to expect from broker and market maker trading software Permitted Order Types and strategies Limit, stop loss, MIT, OCO, If Done, Trailing stops etc Charting and technical analysis MACD, Stochastics, Bolinger, Relative strength, etc etc News, company information and market data Describe some of the different options available Value Added Services In-House seminars and education programs Account Set up Different types of trading account (Execution only, discretionary, advisory) Margin mechanics How does margin work? What charges can be expected? Rollover and overnight charges FX charges for positions not in domestic currency Trading Costs and Commissions: What charges can you expect? Market Maker Spreads Broker commissions FX Charges for trading in non-domestic CFDs FX Baskets Placing an Order How to place an order Order tickets Using limits and stops Monitoring an open position Blotters P and L Calculating margin and margin calls Case study example Trading strategies for active traders and hedgers Speculation Long/Short: Using Leverage Low cost entry and exit opportunities How to use the 'depth of market' in the electronic order book Long Term CFD trades: when does financing make it less worthwhile? Pairs Trading Taking advantage of stock price variation Sector trading Energy versus Metals? Hedging strategies Reducing risk of holding shares When to use CFDs over shares Taxation management The new 'bed and breakfast' More exotic CFD strategies combined with other instruments CFD Basket trading Combining positions in shares, options, and futures Understanding and improving your trading style How well do you trade? What trading plan are you using? What order types are you using? Running winners for longer and losers for less long Stop loss orders Limit orders If Done, OCO and If Touched order types How trading style and performance can be improved Use a trading plan Set entry levels and exit points Volatility and fair value Risk & Regulation Different risks associated with trading CFDs Credit risk Execution risk Market volatility Current Regulation of CFDs The FSA and the European Commission have key roles to play in the future of CFDs in financial markets and even slight changes to regulations regarding these instruments could have marked effects on the industry What FSA regulations govern the use of CFDs? How is the new European directive MiFID changing the requirements for best execution? Conclusion What is the future for CFDs? Appendices Directory of CFD Brokers

Author

David James Norman has been involved in trading and financial markets technology for over 20 years. He has traded and overseen corporate trading operations in a variety of stock and derivatives markets, provides consultancy, seminar and coursework in the field of market technology to exchanges, global trading houses and investment banks, and has taught graduate classes in market technology for three years in Chicago. He is the author of four books on trading and market technology: Trading at the Speed of Light (Paradym, 2001), Professional Electronic Trading (John Wiley & Sons, 2002) Trader DNA (Paradym, 2006) and The Virtual Trader (Paradym 2007). Formerly the Director of Market Technology at Illinois Institute of Technology, IIT he now works in London as a financial markets consultant for Office for Market Technology, Ltd.