CFD Trading on Speculative Shares

The majority of CFD brokers in Australia offer CFDs over the stocks making up the ASX top 300, the rationale behind this is simple, stocks with a larger market capitalisation are often far more liquid. Several CFD providers forget that we live in Australia, a country abundant with resources and naturally also rich in resource shares. A large amount of stocks listed on the ASX are resource based, this is in fact the largest sector of the Australian stock market.

Trading CFDs over junior resource stocks can be very worthwhile if you select your stocks prudently. When trading CFDs over speculative stocks you must always do some research on the company. Prior to selecting your shares you must ensure that the company has great management and a superb project. Needless to say if the copper price has gone up and you are looking for exposure to stocks in this sector logically you would not choose a CFD over a share with gold assets, this is the reason choosing stocks within the relevant sector is also crucial. It’s always important to keep in mind buying and selling CFDs over speculative stocks also has risks as these sorts of stocks can go up in price as quick as they can come down.

So why a trade CFD instead of buying the Stock outright?
The answer to this question is straightforward and can be summed up in a couple of words, unrealised profits and losses. Unlike shares CFDs are marked to market daily meaning that the profits or losses are credited or deducted to and from your trading account every trading day. The profits and losses from trading shares are dealt with very differently in that they're only realised once the stock is sold. Realising profits and losses daily means that you can utilize your unrealised to profits to buy new positions without having to deposit further funds into your trading account, not surprisingly the same goes for losses in that you'll have to deposit money into your trading account if the position moves against you.

It is vital that you note that most speculative stocks may have a higher margin obligation than shares in the ASX top 300, their margin requirement can be as high as 100% allthough the majority are obtainable on a margin of 75%. One critical factor to consider here is whether or not your CFD provider will charge you financing on the full notional worth of the position, this would of course be quite large if the position was on a 100% margin, there are however some CFD brokers that will only charge financing on the borrowed amount. It would be far more economical to pick a CFD company which will only charge you on the borrowed amount, if the CFD is on 100% margin it will deliver a major cost saving.

There are actually very few CFD companies in Australia that will let you trade CFDs on all ASX listed stocks, certainly one of the most popular CFD companies is IC Markets. Among the list of major advanatages of trading with IC Markets is that they don’t have any CFDs on 100% leverage and only charge financing on the borrowed total meaning that you won’t pay any financing charges for CFDs purchased on 100% margin.

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To discover out more on the subject of trading CFDs on speculative resource stocks you ought to visit IC Markets website, here you will find allot of CFD education to help you formulate your trading plan and get started.

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