Cfd Trading

Key CFD Concepts

What is a CFD?

A Contract for Difference is a leveraged derivative. You don't own the underlying asset -- you're trading the price movement. Profits and losses are amplified by leverage.

Margin

The deposit required to open a position. For example, a 5% margin factor means you need 5% of the full position value as margin. A £10,000 position requires £500 margin.

margin_required = position_value * margin_factor
position_value  = price * size * (contract_size or 1)

DFB (Daily Funded Bet)

The most common expiry type on IG. DFB positions:

• Have no fixed expiry date (they roll daily)
• Incur overnight funding charges if held past the daily funding time
• Are suitable for short-to-medium term trading
• The funding charge is based on the underlying rate + IG's markup

Expiry Types

• DFB: Daily funded -- rolls daily, funding charges apply overnight
• Monthly/Quarterly: Fixed expiry (e.g. "SEP-25") -- no overnight funding but wider spreads
• -: No expiry (some instruments like FX)

Spread

The difference between the bid (sell) price and offer (buy) price. This is IG's primary commission on CFDs.

• You BUY at the offer price (higher)
• You SELL at the bid price (lower)
• To break even, the market must move by at least the spread in your favor

Workflows

Opening a CFD Position

Step-by-step workflow for entering a new trade.

1. Find the market:

   ig_search_markets(searchTerm: "AAPL")
   

   Note the epic from the results. Common epic patterns:

   • Shares: CS.D.AAPL.CFD.IP (CFD), SA.D.AAPL.CASH.IP (spread bet)
   • Indices: IX.D.FTSE.DAILY.IP, IX.D.DAX.DAILY.IP
   • FX: CS.D.GBPUSD.TODAY.IP
   • Commodities: CS.D.USCGC.TODAY.IP (gold)

2. Check instrument details:

   ig_market(epic: "CS.D.AAPL.CFD.IP")
   

   Extract and verify:

   • instrument.minDealSize -- minimum position size
   • instrument.marginFactor -- margin requirement percentage
   • instrument.currencies -- available currencies
   • instrument.expiry -- expiry type
   • snapshot.bid / snapshot.offer -- current prices
   • snapshot.marketStatus -- must be TRADEABLE
   • dealingRules -- min stop distance, min limit distance

3. Calculate margin and present trade summary:

   Direction:  BUY (long) / SELL (short)
   Instrument: Apple Inc (CS.D.AAPL.CFD.IP)
   Size:       10 contracts
   Price:      $185.50 (offer for BUY)
   Expiry:     DFB
   Margin:     ~$370 (at 20% margin factor)
   Stop:       $180.00 (distance: 550 points)
   Limit:      $195.00 (distance: 950 points)
   Risk/Reward: 1:1.7
   

4. Wait for user confirmation

5. Execute the trade:

   ig_create_position(
     epic: "CS.D.AAPL.CFD.IP",
     direction: "BUY",
     size: 10,
     expiry: "DFB",
     currencyCode: "USD",
     forceOpen: true,
     guaranteedStop: false,
     orderType: "MARKET",
     stopDistance: 550,
     limitDistance: 950
   )
   

6. Verify the deal:

   ig_deal_confirmation(dealReference: "<returned reference>")
   

   Report: OPEN (accepted) or REJECTED (with reason).

Closing a CFD Position

1. List positions: ig_positions
2. Identify the position: Note dealId, direction, size
3. Present close summary:

   Closing: Apple Inc BUY x10
   Entry:   $185.50
   Current: $190.20
   P&L:     +$47.00
   

4. Wait for user confirmation
5. Close:

   ig_close_position(
     dealId: "<deal_id>",
     direction: "SELL",    // opposite of BUY
     size: 10,
     orderType: "MARKET"
   )
   

6. Verify: ig_deal_confirmation

Partial Close

You can close part of a position by specifying a smaller size:

ig_close_position(
  dealId: "<deal_id>",
  direction: "SELL",
  size: 5,            // close half of a 10-size position
  orderType: "MARKET"
)

Adjusting Stops and Limits

After a position is open, modify protection levels:

ig_update_position(
  dealId: "<deal_id>",
  stopLevel: 7400.0,
  limitLevel: 7600.0
)

For trailing stops:

ig_update_position(
  dealId: "<deal_id>",
  trailingStop: true,
  trailingStopDistance: 50,
  trailingStopIncrement: 10
)

Setting Up a Limit Order (Working Order)

For entering at a specific price rather than the current market price:

1. ig_market to get current price and dealing rules
2. Determine entry level (must respect minimum distance from current price)
3. Confirm with user
4. Execute:

   ig_create_working_order(
     epic: "IX.D.FTSE.DAILY.IP",
     direction: "BUY",
     size: 2,
     level: 7400,
     type: "LIMIT",            // buy below market / sell above market
     currencyCode: "GBP",
     expiry: "DFB",
     guaranteedStop: false,
     timeInForce: "GOOD_TILL_CANCELLED",
     stopDistance: 50,
     limitDistance: 100
   )
   

Order types:

• LIMIT: Buy below current price or sell above current price (expect reversal)
• STOP: Buy above current price or sell below current price (expect breakout)

Checking Costs Before Trading

For EU-regulated accounts, check indicative costs:

ig_costs_open(
  epic: "CS.D.AAPL.CFD.IP",
  direction: "BUY",
  size: 10,
  orderType: "MARKET",
  currencyCode: "USD"
)

Common Patterns

Going Long (Bullish)

• Direction: BUY
• Profit when price rises
• Stop below entry, limit above entry
• Close with SELL direction

Going Short (Bearish)

• Direction: SELL
• Profit when price falls
• Stop above entry, limit below entry
• Close with BUY direction

Hedging

Open a position in the opposite direction on the same or correlated instrument with forceOpen: true. This creates a second position rather than closing the first.

Risk Warnings

• Leverage amplifies losses as well as gains. A 5% margin position means a 1% adverse move costs 20% of your margin.
• Overnight funding on DFB positions adds up. For long-held positions, consider monthly/quarterly expiry to avoid daily charges.
• Guaranteed stops cost extra (wider spread) but protect against gapping. Consider them for volatile instruments or event-driven trades.
• Market gaps can cause stop-losses to be executed at worse levels than set (slippage). This is especially relevant over weekends and around major announcements.
• Minimum deal sizes vary by instrument. Always check with ig_market before presenting trade options.