Welcome to Mitrade's Help Centre

A CFD (Contract For Difference) is a very popular financial derivative in the market. By trading a CFD at Mitrade, the client enters into a contract with us to execute a contract, which is a contract on the future price trend of a financial product. The client aims to earn the difference between a future price of the financial product and its current price by a "sell high and buy low" or a "buy low and sell high" strategy. In theory, this financial product can be any variety of existing investments in the world, because a platform can provide CFDs for various financial products such as stocks, stock market indices, futures, bonds, foreign exchange, and even interest rates to be traded as long as they are actually circulating in the market and have certain trading volumes.

A CFD is only binding on the future price of a financial product, and does not involve its substantive control. In traditional stock trading, you have to be a shareholder before you can enjoy the rights to rises or declines in stock prices. In CFD trading, however, you can enjoy those rights after you have executed the CFD.


When you decide to hold/short a certain stock, your profits or losses come from rises or declines in the price. Neither will you need to nor will you become a shareholder. This is the convenience brought about by trading CFDs: you may trade products in different asset classes through CFDs without opening an account for each asset class.


Please note: CFD trading carries a high level of risk and is not suitable for all investors. Please read the Risk Disclosure Statement before choosing to start trading.

Trading CFDs have benefits in the following five aspects:

1. Since CFDs are not concerned with ownership of financial assets, trading CFDs for stocks or stock indices does not entail payment of stamp duties or delivery fees for futures.

2. CFDs can be traded in both directions, i.e., you may go long or short CFDs. Take stock index CFDs for example. As they do not involve ownership, you may choose to sell stock index CFDs without borrowing them first as in the short-selling of a stock.

3. You only need to execute contracts with Mitrade. You may process transactions for almost all types of investments, such as FOREX, futures, and indices, through one account on the Mitrade trading platform, without having to open different accounts for different financial products.

4. Small amounts of funds can be diversified into different financial products to reduce the risk of over-concentration.

5. All products can be leveraged through margins, and you may participate in large transactions without investing the full amount of money.


Please note: CFD trading carries a high level of risk and is not suitable for all investors.  Please read the Risk Disclosure Statement before choosing to start trading.

Risks generally come from the following sources:

1. Loss of principals
When you buy a CFD worth of $100,000, assuming a margin of 5%, you only need to deposit 5% of the total value of the position as the initial margin, which is $5,000. However, if the product price moves 5% in a direction that is unfavorable to you, you will lose $100,000*5% = $5000, that is, all of your principal.

2. Forced liquidation
You must ensure that you have sufficient funds in your account to meet your margin requirements, or some or all of your positions may be closed when your account equity falls below the maintenance margin. You must continuously monitor your account and deposit additional funds or close some positions to ensure that the account can always meet the margin requirements.

3. Price fluctuations
Considering that financial markets experience frequent daily fluctuations, Mitrade is committed to ensuring that our product prices are close to peripheral prices. But it is inevitable that market fluctuations may at times create a gap in prices when an emergency event breaks out, and Mitrade will act to reflect this situation. This will impact the execution price of a trade, especially those stop-loss/take-profit orders. You may not be able to stop loss/take profit of your positions at the expected price when the market fluctuates violently.

4. Counterparty risk
When you trade on our platform, your counterparty is always Mitrade. As a fair and just dealer, we offer stable prices and always make references to prices quoted at other international financial institutions and exchanges. We will continue to perform our obligations to you as stipulated in different trading terms. At the level of FOREX trading, the so-called counterparty risk is the risk that the dealer will not fulfill the terms of the contract.

5. Leverage
Suppose you buy a stock index CFD worth of $10,000 with a margin rate of 10%, you only need to pay a margin of $1,000. However, your position is equal to the face value of the CFD you have purchased for $10,000, so that market fluctuations may amplify changes in your positions.

Please note: CFD trading carries a high level of risk and is not suitable for all investors. Please read the Risk Disclosure Statement  before choosing to start trading.

Generally, CFD trading involves leverage. With leverage, investors can operate trading positions larger than the funds in their accounts, but they need to calculate the actual sizes of their leveraged positions, which involves the calculation of notional value.

Example:
Suppose an investor buys 10 lots of SPX500, and the trading account currency is the US dollar. If the current price of SPX500 is $2559, and the trading currency of SPX500 is USD.
SPX notional value = current price * contract size
             = USD2559 * 10
             = USD25,590
So the investor is controlling a SPX500 CFD worth of $25,590.00 in total.


CFD trading is only suitable for those who fully understand market risk and preferably have a lot of trading experience. CFD products are highly risky investments that are not suitable for all clients, nor can they account for their own investment risks. You should assess whether it is appropriate for you to participate in CFD trading in light of your circumstances, or seek independent professional advices by yourself.

Market risk includes the impact of various breaking news and market movements on your trading positions. Especially when market slippage occurs, fluctuations in clients' positions may be even greater. Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. The bigger the difference, the greater impact on the client's position. You need to be clear about the risks associated with trading on Mitrade, maintain sufficient financial resources to cover them, and carefully monitor your portfolio.

Please note: CFD trading carries a high level of risk and is not suitable for all investors. Please read the Risk Disclosure Statement before choosing to start trading.

CFDs are not suitable for long-term investments. If you hold CFDs for an extended period of time, the associated costs, including overnight funding fees, will increase, hurting your long-term investment performance. Moreover, CFDs do not provide any rights to the underlying assets, including the voting right or the right to subscribe and split shares of a stock.

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