What is Short-Selling? | CFD Trading Singapore | Phillip CFD (2024)

FAQs

What is Short-Selling? | CFD Trading Singapore | Phillip CFD? ›

With CFD trading, you are agreeing to exchange the difference in price of your chosen asset from when the position is opened to when it is closed. When you short-sell a CFD, you open a position to 'sell' the asset.

CFD stands for 'contract for difference', a type of derivative product that you can use to speculate on the future direction of a market's price. When trading via CFDs, you don't take ownership of the underlying asset, which means you can take advantage of rising and falling markets by going long or short.

Key differences between HK and SG short selling regimes

A key difference is that 'naked' short selling, which is illegal in Hong Kong, is permissible in Singapore. Another difference is that the Hong Kong regime does not cover derivatives at all, whereas certain derivatives are still subject to reporting in Singapore.

CFD trading is legal in Singapore and is regulated by the Monetary Authority of Singapore (MAS).

Short selling is a strategy that can be used in many financial markets, including the Contracts for Difference (CFD) market. However, there is a difference as compared to traditional stock trading.

Why Are CFDs Illegal in the U.S.? Part of the reason why a CFD is illegal in the U.S. is that it is an over-the-counter (OTC) product, which means that it doesn't pass through regulated exchanges. Using leverage also allows for the possibility of larger losses and is a concern for regulators.

It is as real as any form of traditional investing or trading but has some unique aspects that set it apart from other forms of investing or trading. One of the reasons for CFDs' appeal is that a contract for difference (CFD) allows you to trade a currency pair, a stock, an index, or a commodity without owning it.

SGX will impose a penalty of S$1000 or 5% of the value of the failed trade for all buying-in (whichever is higher).

Subsequently, in addition to Spain, on 18 March Belgium, France, Italy, Austria, and Greece also issued long-term bans which lasted, taking into account the renewals, until 18 May 2020. monthly equity performance was close to an historic high, with a further increase observed in May 2020.

Which countries are CFD banned? ›

Which countries ban CFD? CFDs are illegal in the US and Hong Kong but in other countries, they can be traded under strict regulations.

You should never trade with money that you can't afford to lose, but there are ways to mitigate the risk. This is where CFDs are very different from gambling. The latter is purely based on luck, while CFDs require a degree of skill, knowledge and experience to help achieve the best results.

It's possible to make money trading CFDs with experience and a thorough understanding of how the financial markets work. But, it's well known that around 75% of retail traders (private investors) lose money when trading CFDs.

This requires constant vigilance of the market and price movements. As well as the use of effective risk management to safeguard funds. Some of the most popular risk management tools used in CFD trading are stop-loss and take-profit orders.

A guaranteed stop loss order, offered by some CFD providers, is a pre-determined price that, when met, automatically closes the contract. Even so, even with a small initial fee and potential for large returns, CFD trading can result in illiquid assets and severe losses.

CFDs don't have an expiry date so they can be held indefinitely, regardless of whether you have opened a long or short position. However, there are spreads and overnight fees attached to CFD trades, so holding a CFD for long periods can incur significant additional costs.

Example of a CFD

The investor buys 100 shares of the SPY for $250 per share for a $25,000 position from which only 5% or $1,250 is paid initially to the broker. Two months later the SPY is trading at $300 per share, and the trader exits the position with a profit of $50 per share or $5,000 in total.

The main difference between CFDs and investing is that CFDs are leveraged, while investing in shares is non-leveraged. We offer CFD trading on shares, indices, commodities, forex, options, futures and more. Share dealing is available for investing in shares and ETFs. View our markets below.

CFD trading can be attractive to beginner traders, but it also involves significant risk. First, beginner traders should make sure they understand the basics of CFD trading, including leverage, margin and stop-loss orders. It's also crucial to choose a reputable and regulated CFD broker.