Take your first HS50 trading position
Let’s take a more detailed look at the various ways you can open a position via CFD trading.
A contract for difference (CFD) is an agreement to exchange the difference in price of an underlying asset, as measured from the time the contract is opened until the time it’s closed.
So, however much the price of that asset has risen or dropped since you opened your position is what you stand to make as a profit or a loss, depending on whether your prediction is correct or incorrect.
You can trade CFDs on HS50 via:
- Cash indices: predict the current price of the underlying market and get tighter spreads. Short-term traders prefer this method
- Index futures: agree to trade the index at a predetermined price on a date in future. Longer-term traders prefer this method
- Options: buy the right (but not the obligation) to trade the index at a specified price in future. Experienced traders with a longer-term view prefer this method
- ETFs: trade all Hang Seng-related stocks, on the spot, in a single position
- Shares: make a prediction on Hang Seng-listed shares’ prices rising or falling without owning them
Here’s an example of how CFD trading works. Say you believe that the HS50 cash index is set to rise from its current price of 20,000. So, you buy 10 CFD contracts on our index worth $5 per contract. Your prediction is correct, and you close your position when the sell price is 20,090. The difference is 90 points, multiplied by the $5 per contract multiplied by 10 contracts, so your profit is $4500 – excluding other costs.
If your prediction is incorrect and the market drops, and you closed your trade at a level of 19,950, your loss would be $2500 – excluding other costs.
