What is CFD Trading?？

Simply put, a CFD transaction is the difference between the buyer's payment to the seller of the current value of the asset and its value at the time of the contract.。

CFD trading allows you to speculate on the rise or fall in the prices of fast-moving global financial markets (or instruments) such as stocks, indices, commodities, currencies and government bonds without having to buy the underlying asset。CFDs mimic the price of the underlying asset, thus becoming a popular investment vehicle。

How CFDs work？

Here are four key concepts you need to understand before investing in CFD trading in Malaysia。

Point difference

With CFD trading, you will always get two prices based on the value of the underlying instrument: the buy price and the sell price。The buy price will always be higher than the current underlying value and the sell price will always be lower than the current underlying price, the difference between these prices is called the spread。

Contract Size

The size of contracts traded in CFDs depends on the underlying asset。In derivatives trading, the underlying asset is the financial instrument represented by the derivative and the factor that gives the derivative value.。

For CFD stocks, the contract size usually represents one share of the company you are trading in.。For example, to open a simulated position to buy 500 Ambank shares, you would need to buy 500 Ambank CFDs。

Due Date

One of the key points to keep in mind when trading CFDs is that they have no expiration date and only close positions when trading in the opposite direction。For example, a position to buy 500 gold contracts can be closed by selling 500 gold contracts.。

gains and losses

Gains and losses can be calculated by the formula, which is the number of contracts you hold multiplied by the spread。In order to fully calculate the profit or loss of the trade, it is necessary to subtract any fees you pay。

Profit and loss = number of CFDs x (closing price - opening price)

Key Features of CFD Trading

Some of the benefits of CFDs include access to the underlying asset at a lower cost than buying the asset outright, ease of execution, and the ability to go long or short。

For example, if a stock has an asking price of RM25.20, while a trader buys 100 shares, the transaction cost is RM2,520 plus commissions and fees。This trade requires at least RM1,260 free cash in a 50% margin account with a traditional broker, while a CFD broker requires only 5% margin or RM126.。

Now let's look at the other main functions and uses of CFD trading.。

Short and long trades

Simply put, when you get two prices, choose to trade at a bid price slightly higher than the market price, and you establish a "long" position。Instead, trading at a sell price slightly below the market price will open a "short" trading position for you。

Leverage

CFD trading is leveraged, which means you don't have to bear the full cost from the start to gain exposure to important positions。However, it is important to pay attention to the leverage ratio and ensure that you trade within your means。

Margin

When trading CFDs, there are two types of margin。Deposit margin is required to open a position, while maintenance margin may be required if your trade is close to generating deposit margin and losses that cannot be compensated by any additional funds in your account。

Hedging

Hedging is an effective investment mechanism designed to offset or eliminate the risks involved in another form of investment。CFDs can be used as a hedging tool to help you profit from a falling market。

Best CFD Trading Platform in Malaysia

A trading platform or broker is an individual or company that arranges a transaction between a buyer and a seller and receives a commission when the transaction is executed, and the broker who is also the seller or the buyer becomes the main party to the agreement。

1. XTB

Headquartered in London and Warsaw, XTB is regulated by a number of financial institutions around the world, including the UK's Financial Conduct Authority (FCA) and Poland's Financial Supervisory Authority (KNF).。

If you are looking for a low-cost and high-quality deposit and withdrawal service, it is recommended that you use XTB。In addition, XTB's account opening process is very easy, fully digital and simple, and your account can start trading on the same day。

As we all know, XTB charges a relatively low fee for stock index CFDs。In addition, the deposit and withdrawal of CFD on the platform are completely free。You can also use several options including credit / debit card or e-wallet。

Account Fees	None
Inactive expenses	None
Withdrawal Fee	None
S & P 500 Index CFDs Fees	0
Europe 50 Index CFDs Fee	0
Minimum deposit	$250 (RM1,065)
Account Opening Duration	1 day
Bank transfer	Available
Credit Card	Not available
electronic wallet	0
Currency pairs	49
stock index CFDs	42
stock CFDs	1,700
ETF CFDs	103
Bond CFDs	3
Commodity CFDs	18

2. eToro

Founded in 2007, eToro is a prominent Israeli fintech startup。eToro serves clients outside the UK and Australia through entities regulated by the Cyprus Securities and Exchange Commission (CySEC)。

If you are interested in social trading, this platform is perfect for you and is equipped with zero commission stock trading。In addition, eToro offers other innovative features such as documentary trading, allowing you to follow other traders' strategies.。

Account Fees	None
Inactive expenses	有有
Withdrawal Fee	$5 (RM21.24)
S & P 500 Index CFDs Fees	$2.4 (RM10.19)
Europe 50 Index CFDs Fee	$2.7 (RM11.47)
Minimum deposit	$200 (RM849.50)
Account Opening Duration	1 day
Bank transfer	Available
Credit Card	Available
electronic wallet	Available
Currency pairs	47
stock index CFDs	13
stock CFDs	2,042
ETF CFDs	145
Bond CFDs	0
Commodity CFDs	14

3. IG

Founded in the UK in 1974, IG is one of the world's largest CFD brokers and is regulated by a number of institutions around the world, including top regulators such as the Financial Conduct Authority (FCA) and the Federal Financial Supervisory Authority (BaFin).。

It is recommended that traders of any level of experience look for an easy-to-use trading platform. IG's online trading platform is well-designed, user-friendly and easy to customize; there are also many useful educational tools to learn; funds and withdrawals are simple, providing users with A variety of options。

Account Fees	None
Inactive expenses	有有
Withdrawal Fee	$0
S & P 500 Index CFDs Fees	$1.9 (RM8.07)
Europe 50 Index CFDs Fee	$1.6 (RM6.80)
Minimum deposit	$0
Account Opening Duration	1-3 days
Bank transfer	Available
Credit Card	Available
electronic wallet	Available
Currency pairs	205
stock index CFDs	78
stock CFDs	10,500
ETF CFDs	1,900
Bond CFDs	13
Commodity CFDs	47

4. XM

XM is available worldwide and regulated by three financial institutions: the Cyprus Securities and Exchange Commission (CySEC), the Australian Securities and Investments Commission (ASIC) and the Belize International Financial Services Commission (IFSC).。

If you prefer the MetaTrader platform and are looking for low transaction fees, XM is the best choice for you。XM's CFDs and withdrawal fees are low, and the account opening process is user-friendly and fast。You can also use many educational tools such as webinars or demo accounts on this platform。

Account Fees	None
Inactive expenses	有有
Withdrawal Fee	$0
S & P 500 Index CFDs Fees	$2.4 (RM10.19)
Europe 50 Index CFDs Fee	$2.4 (RM10.19)
Minimum deposit	$5 (RM21.24)
Account Opening Duration	1 day
Bank transfer	Available
Credit Card	Available
electronic wallet	Available
Currency pairs	57
stock index CFDs	18
stock CFDs	1,200
ETF CFDs	0
Bond CFDs	0
Commodity CFDs	15

5. City Index

Founded in 1983, City Index is a global CFD and Forex broker.。City Index is regulated by top financial institutions such as the Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC) or the Monetary Authority of Singapore (MAS)。

The platform is recommended for CFD traders looking for excellent research tools。In addition, transaction and non-transaction costs (e.g., withdrawal costs) are relatively low。

Account Fees	None
Inactive expenses	有有
Withdrawal Fee	$0
S & P 500 Index CFDs Fees	$2.1 (RM8.90)
Europe 50 Index CFDs Fee	$1.6 (RM6.80)
Minimum deposit	$0
Account Opening Duration	1 day
Bank transfer	Available
Credit Card	Available
electronic wallet	Available
Currency pairs	84
stock index CFDs	23
stock CFDs	4,500
ETF CFDs	57
Bond CFDs	12
Commodity CFDs	31

We have browsed through 5 best CFD trading platforms in Malaysia, there are other CFD brokers for you to compare and choose from。Please choose a broker that suits your needs and preferences in CFD trading。

Traditional stock trading and CFD trading.

Traditional stock trading is the buying and selling of a company's physical stock, while CFDs trade financial derivatives, and neither type of transaction has an expiration date。

The following table shows the difference between stock trading and CFD trading:

	CFD Trading	stock trading
定义	Trading financial derivatives deals with prices originating in the underlying market, rather than prices in the underlying market itself	Buy and sell the company's physical stock.
Due Date	None (except forwards and options)	None
Hedging	有有	Rarely because other products are more effective
Stamp duty	None	有有
Trading Opportunities	More suitable for short-term investment	Better for long-term investment

Conclusion

As we all know, CFDs are cost-effective and ideal for traders who want to start trading or want to diversify their portfolios。In addition, if the share price of CFDs starts to fall, you can short and sell, and if the price continues to fall, you can profit from it。

If you want to start CFD trading in Malaysia, be sure to learn the comprehensive CFD trading guide that will help you manage your risk and make a profit。Therefore, you need to choose the right broker to guide your investment needs。