How to Trade CFDs in Australia

A Contract for Difference (CFD) is a financial derivative that allows you to trade on the price movements of assets such as forex, indices, commodities, shares, and cryptocurrencies. You don’t own the asset—instead, you enter a contract with your broker based on whether you think the price will rise or fall.

CFDs are leveraged products, meaning you can open larger positions with a smaller amount of capital (called “margin”). While this can amplify profits, it also increases potential losses.

In Australia, CFD trading is regulated by ASIC (Australian Securities and Investments Commission), which ensures retail traders have access to protective measures like standardised leverage limits and risk warnings.

1. Open a Live Trading Account

Open a Live Trading Account at Vantage Markets Australia, complete your profile and verify your ID. Pass a suitability assessment, as required by local regulations.

2. Fund Your Account

Once verified, deposit funds using a preferred payment method.

3. Choose a Market to Trade

Select from over 1,000 instruments including:

- Forex CFDs
- Stocks CFDs
- Indices CFDs
- Commodities CFDs (eg: Gold, Metal, etc.)
- Cryptocurrency CFDs
- ETF CFDs

4. Analyse the Market

Use technical or fundamental analysis to assess the market direction.

5. Place Your Trade

On the trading platform, input your:

• Order type (Market or Limit)
• Position size
• Stop-loss and take-profit levels

Click “Place Order” to execute.

6. Manage Your Trade

Monitor your position and adjust your stop-loss or take-profit as needed.

Market Order:

Executes at the current available price

Limit Order:

Opens a position at a specified better price

Stop Order:

Triggers an entry or exit once price hits a set level

Take Profit:

Locks in profits at your target price

Stop Loss:

Limits your losses by closing the trade at a defined level

CFDs let you profit in both rising and falling markets.

• Going Long: If you believe an asset will rise in price, you enter a buy (long) position. You make a profit if the price goes up.
• Going Short: If you believe the asset will fall in value, you enter a sell (short) position. You profit if the price drops.
  This flexibility is one of the key advantages of CFD trading over traditional investing.

Managing risk is essential when trading leveraged products like CFDs. Here are key tools and strategies:

• Use Stop-Loss Orders: Automatically close losing trades at a predefined level.
• Limit Your Leverage: Start with smaller position sizes to reduce risk exposure.
• Set Take-Profit Orders: Lock in profits when the market moves in your favour.
• Diversify Your Portfolio: Don’t overexpose yourself to a single asset class.
• Use Negative Balance Protection: With Vantage, your losses cannot exceed your account balance.
• Understand Margin Closeouts: If your account falls below required margin levels, open positions may be automatically closed.

1. Shares CFD

• Scenario: You believe Google (GOOG) will rise in value, so you buy 1 CFD contract at 158.25.
• Market Movement: However, the price drops, and you decide to sell the contract at 158.00.
• Outcome: Your loss is calculated as 158.00 - 158.25 = 25 points. Since CFDs allow you to speculate on price movements, you profit if the market moves in your favor and incur a loss if it moves against you.

2. Indices CFD

• Scenario: After analyzing the S&P 500, you predict the market will rise, so you buy 1 CFD contract at 5,319.
• Market Movement: The market goes up, and you sell the contract at 5345.
• Outcome: Your profit is 5,345 - 5,319 = 26 points. CFD trading on indices can be an effective way to speculate on the overall market trend, without owning the underlying assets.

3. Forex CFD

• Scenario: You anticipate that the upcoming U.S. Non-Farm Payrolls report will boost the U.S. dollar. You buy 1 lot of USD/JPY at 142.32.
• Market Movement: After the data is released, USD/JPY rises, and you sell at 142.85.
• Outcome: Your profit is 142.85 - 142.32 = 53 pips. Trading forex CFDs lets you take advantage of currency fluctuations even if you don’t hold the physical currencies.

4. Commodities CFD

• Scenario: You own physical gold and suspect the price may fall, so you hedge your position by selling 1 lot of gold CFDs at 3291.
• Market Movement: Gold prices fall, and you buy back at 3,275.
• Outcome: Your profit from the CFD is 3,291 - 3,275 = 16 points. This helps you offset losses on your physical gold holding, demonstrating how CFDs can be used for hedging purposes.

5. Cryptocurrency CFD

• Scenario: You believe Bitcoin (BTC) will decrease in value. You sell 1 lot of BTC at 83,500.
• Market Movement: BTC falls, and you decide to close the position at 83,420.
• Outcome: Your profit is 83,500 - 83,420 = 80 points. CFDs on cryptocurrencies allow you to trade on both rising and falling prices without needing to own the digital asset directly.

6. ETF CFD

• Scenario: You expect technology ETFs to gain from strong earnings across the sector, so you buy 1 lot of a NASDAQ ETF CFD at 310.
• Market Movement: The ETF rises and you close your trade at 320.
• Outcome: Your profit is 320 - 310 = 10 points. CFD trading on ETFs allows you to gain exposure to a basket of stocks without purchasing each individual share.

7. Bond CFD

• Scenario: You believe that U.S. Treasury yields will decline, which means bond prices will rise. You buy a U.S. 10-year bond CFD at 110.
• Market Movement: The price of the bond CFD increases to 113, and you close the position.
• Outcome: Your profit is 113 - 110 = 3 points. Bond CFDs allow you to trade interest rate expectations without directly owning the bond itself.