Contracts

for
Difference
 Page 2

CFDs explained

What Benefits
are of
CFDs? CFDs
If you are interested in trading CFDs (Contracts for Difference) 33 Profit from rising or falling markets.
or you simply want to know what they are and how they work, 33 No stamp duty is payable (saving 0.5% compared to
youre in safe hands. Guardians CFD Team are knowledgeable traditional shares).
and experienced at trading all types of CFDs.
33 Trade on margin allowing you to leverage your capital.
A CFD is simply an agreement to exchange the difference in value 33 Trade Global Equities, Indices, FX and Commodities on a
of a particular share (or other financial instrument) between the single account with multiple currencies.
time at which the contract is opened and the time at which it
is closed. 33 Limit and manage risk using Stop Loss and Limit Order
facilities.
In the case of share CFDs unlike a traditional share when you 33 No fixed expiry date.
open a position you are not required to pay for the full value of 33 Low commissions.
the trade but rather you are required to deposit collateral. This
is known as the Initial Margin, which can be as low as 5% of the
purchase price. In recent years there has been a dramatic increase
in the use of CFDs, they have in a short space of time become the
instrument of choice for short term stock market investors. If you
are not interested in high risk investments then it is probably safe
to say that CFDs are not suitable for you and we would strongly
advise that you do not attempt to trade these products.

Key Features
of
CFDs
Traded on Margin
Rather than pay the full value of a transaction you only need to
pay a percentage when opening the position. This is referred to
as Initial Margin. The key point is that the margin allows leverage,
so that you can access a larger amount of shares than you would
be able to, if buying or selling the shares themselves. The margin
on all open positions must be maintained at the required level
in order to keep the position open. If a position moves against
you and reduces your cash balance so that you are below the
required margin level on a particular trade, you will be subject
to a Margin Call and will have to pay additional money into your
account to keep the position open or you may be forced to close
your position.
Trade in Rising or Falling Markets
CFDs allow you to trade Long or Short. A Long trade is where
you Buy an asset with the expectation that it will rise, just as you
would when buying a normal share. A Short trade is where you
Sell an asset that you do not own in the expectation that the
price will fall and you can Buy the asset back at a cheaper price.
No Stamp Duty
There is no stamp duty on CFDs as you do not actually Buy the
underlying share*.
*Tax laws may change
Page 3
CFDs explained
Commission
Commission is charged on CFDs just like on an ordinary share
trade. The commission is calculated on the total position value not
the margin paid.
Overnight Financing
Because CFDs are traded on margin, if you hold a position open
overnight it will be subject to a finance charge. Long CFD positions
are charged interest, Short CFD positions will be paid interest.
The rate of interest charged is set at 3%** above or below the
current LIBOR (London Inter Bank Offered Rate). The interest
on each position is calculated daily by applying the applicable
interest rate to the daily closing value of the position. The daily
closing value is the number of shares multiplied by the closing
price. Each days interest calculation will be different unless there
is no change in the share price.
Shares and Indices
CFDs allow you to take a view on shares and indices as well as
some sector specific indices (such as Mining). See page 10 for
more details.
Risk Management Facilities
We place strong emphasis on risk management techniques.
Robust risk management to protect profit and limit downside risk
is as important as placing the trade
Because of the higher risk nature of trading on margin, we can
offer comprehensive Stop Loss Order and Limit Order facilities
so that investors can manage risk in fast moving markets.
**Subject to change
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CFDs explained

Guardian
Education
Guardian, via one to one meetings, talk you through your trading Demo Accounts
strategy, objectives and how to best manage your expectations.
Youll also benefit from useful information online to help you make This will allow you to practise placing trades on our CFD platform,
the most of trading with us, including a range of helpful guides to practise your trading strategy, work your way around the system
develop yourtrading skills. and be comfortable on how to enter and exit trades.

Including: Our demo platform has real time pricing and will allow you to
undertake the following:
33 Trading CFDs vs Convential Equities.
33 Pyschology of Trading. 33 Place all variations of Orders.

33 Market Fundamentals. 33 Place Stop and Limit Orders to take profit at a pre
determined level and to minimise downside risk.
33 Technical Analysis.
33 Using our trading information consisting of Charting
33 Fundamental Analysis. & Fundamental Analysis.
33 How to trade around your physical portfolio (if applicable). For more information, visit www.guardianstockbrokers.com
33 How to trade from Economic Figures (both UK / US).
33 Advantages and Disadvantages of Trading CFDs. Trading Plan
33 How to trade CFDs via a SIPP.
Guardian will discuss your trading plan in person and focus on
the following:

33 How much capital you would like to commit?

33 What are you looking to use the account for? Speculation,
hedging and/or dividend trading.
33 Are you focusing on a specific sector or commodity?
33 Trading Plans can be tailored to your individual needs.

This will be conducted in greater detail during the account opening

process.
 Page 5

CFDs explained

Share CFD
example
Long Trade
A Long trade is when you Buy a share CFD Profit on trade is calculated as follows:

Marks and Spencer is trading at 240240.25p

Opening Level 240.25p
You believe that Marks and Spencers share price is going to rise Closing Level 270p
and place a trade to Buy 5000 shares as a CFD at 240.25p.
Difference 29.75p
The value of the contract would be 12,012.50, but you would
only be required to make an initial deposit of 10% (Initial Margin) Profit on trade 1,487.50 (29.75p x 5000)
of 1,201.25. Total commission (127.56) 50 bps
Interest payments (29.60)
The commission on the trade is 60.06 (12,012.50 x 0.5%)
unlike a traditional share there is no stamp duty payable. Overall Profit 1330.34

10 days later Marks and Spencer is trading at 270270.25p
You decide to close your position and take a profit by selling
5000 Marks and Spencer at 270p which equates to 13,500.
The commission on the trade is 67.50 (13,500 x 0.5%).
Of course if the market had moved against you, you would have
made a loss.
For more detailed CFD trading examples please visit our website
www.guardianstockbrokers.com
 Page 6

CFDs explained

Share CFD
example
Short Trade
A Short trade is when you Sell a share CFD Profit on trade is calculated as follows:

Marks and Spencer is trading at 300300.25p

Opening Level 300p
You believe that Marks and Spencers share price is going to fall Closing Level 280.25p
and place a trade to sell 5000 shares as a CFD at 300p. The value
Difference 19.75p
of the contract would be 15,000, but you would only be required
to make an initial deposit of 10% (Initial Margin) of 1,500. Profit on trade 987.50 (19.75p x 5000)
Total commission (145.06) 50 bps
The commission on the trade is 75 (15,000 x 0.5%).
Interest payments 7.70
10 days later Marks and Spencer is trading at 280280.25p Overall Profit 850.14

You decide to close your position and take a profit by buying 5000
Marks and Spencer at 280.25p. The commission on the trade is
70.06 (14,012.50 x 0.5%).
Of course if the market had moved against you, you would have
made a loss.
In this example by being Short M&S, interest payments are cred-
ited to your account.

For more detailed CFD trading examples please visit our website
www.guardianstockbrokers.com
 Page 7

CFDs explained

Example Example
Indices Indices
Trade Long Trade Short
The FTSE 100 is currently trading at 5792 and the quote is 5791 The FTSE 100 is currently trading at 4400 and the quote is 4399
5793 on the FTSE CFD. You believe that the FTSE is going to rise 4401 on the FTSE CFD. You believe that the FTSE is going to fall
and Buy 1 Maxi Index CFD at a total value of 57,930. To open and sell 1 Maxi Index CFD at a total value of 43,990. To open your
your position you supply a deposit of 2,000 per Maxi Contract. position you supply a deposit of 2,000 per Maxi Contract. Later
Later that day FTSE has risen to 5991 and the daily FTSE spread that day FTSE has fallen to 4299, spread is now 42984300.
is now 59905992. You decide to close your position and take a You decide to close your position and take a profit by buying 1
profit by selling 1 Maxi Index CFD which equates to 59,900. Maxi Index CFD which equates to 43,000.
The profit on the trade is calculated as follows:
The profit on the trade is calculated as follows:
Opening Level 5,793.00
Opening Level 4,399.00
Closing Level 5,990.00
Closing Level 4,300.00
Difference 197.00
Difference 99.00
Profit on trade (197 x 10) 1,970.00
Profit on trade (99 x 10) 990.00

Overall Profit
Overall Profit
To calculate the overall profit you must take into account the com-
mission and financing charges on the deal. To calculate the overall profit you must take into account the com-
mission and financing charges on the deal.
Profit On trade 1,970.00
Profit On trade 990.00
Commission (50.00)
Commission (50.00)
Overall Profit On the trade 1,920.00
Overall Profit On the trade 940.00
Of course if the market had moved against you, you would have
made a loss. Of course if the market had moved against you, you would have
made a loss.
For more detailed CFD trading examples please visit our website
www.guardianstockbrokers.com

Limit
and
Stop Loss Orders
Because of the geared nature of trading on margin it is essential
to have access to facilities that let you open or close positions if
certain levels are reached.
Limit Order
A Limit Order is one that is executed at a better price than the
prevailing market price, i.e. for a Long CFD trade when the stock
drops to a certain level or for a Short CFD trade when the stock
rises to a certain level.
Example Limit Order
Cable & Wireless is trading at 180180.5
You want to Buy 10,000 Cable & Wireless as a CFD with a Limit
of 175p, therefore you do not wish the Order to be opened unless
Cable & Wireless reaches 175p.
This Order is held by the CFD Provider until the Limit level is
reached. The next day Cable & Wireless is 174.5175 and an
opening trade of 10,000 Cable & Wireless is executed at the Limit
level of 175p.
Page 8
CFDs explained
Stop Loss Order
A Stop Loss Order is one that is executed at a worse price than the
prevailing market price. A Stop Loss Order is a price level set by
the client on a particular trade, that if reached, automatically closes
out the particular position at the desired price. It is possible to
make substantial profits when trading CFDs as well as substantial
losses which is why we may recommend you consider placing a
Stop Loss Order when you trade.
Example of Stop Loss
BP is trading at 467468
You believe that BP will rise and you Buy 2,000 BP at 468p as
a CFD. You want to limit your potential losses as the markets are
currently very volatile. You place a Stop Loss Order which will close
out your position at 450p. The following day BP drops steadily to
420421 and you are not able to watch the market. Your position
is closed at 450p limiting your loss to 360, had you not placed
a Stop Loss your losses would be running at 960.
 Page 9

CFDs explained

Types
of
Trading Markets
Sector Trading Guardian Stockbrokers provide the complete trading solution.
Our system allows you to trade online or by telephone in virtually
We can offer advice with a number of trading strategies in this any financial instrument including:
area:
Shares
Aerospace & Defence Oil & Gas
Bank Pharmaceuticals & Biotech You can trade over 7000 individual shares on all major markets
including;
Construction Real Estate
Engineering & Machinery Retail Indices
Insurance Telecommunication Services You can trade all major indices including FTSE 100, FTSE 350,
Leisure, Entertainment Tobacco Dow 30, Nasdaq, S&P 500, CAC 40, DAX and Eurostoxx.
& Hotels Transport
Mining FX
Utilities
You can trade all major currency pairs as well as many minor cur-
rency pairs.
Pairs Trading
Energy
If you believe that one company is undervalued compared to
another company in the same sector (e.g. Rio Tinto against Lon- You can trade all major US and UK Oil and Gas contracts.
min) you can use CFDs to go Long on the cheaper stock whilst
Metals
going Short on the more expensive stock.
You can trade spot and forward contracts in Gold and Silver.
Short Term Trading Commodities
You can trade some of the key contracts in London, Chicago, New
The ability to gear up your trading capital by trading on a margin, York, and Paris including Cocoa, Cotton, Wheat and Soyabeans.
combined with no stamp duty make CFDs an ideal instrument for
short-term trading.

Hedging

Hedge physical portfolio for a fraction of the cost.

 Page 10

CFDs explained

Why
Trade with
Guardian?
Here at Guardian we want our Brokers to build long term
relationships with their Clients. We will also provide a
Director of Guardian Stockbrokers as a senior point of
contact to all clients in the event you wish to talk to them.

33 First and foremost we value your business. 33 Force open facility.

33 CFD Trading with quality advice specific to your trading
requirements.
33 No conflict of interest we do not make a market or trade
against your positions.
33 State of the art trading platforms Trade with a combination
of clearing brokers.
33 Strong emphasis on risk management.
33 Cap your exposure with our Limited Risk Account.
33 Active Management System.*
33 Fast and Instant Execution experience of trading 100s of
Orders per day and auction trading.
33 Real time margin / profit / loss.
33 Trading on market spreads.
33 Only trading when opportunities arise and not being afraid to
be out of the market.
33 Sophisticated Trading Tools Interactive Real Time Charting
and Technical Analysis.
33 Full audit trail of all working and filled Orders including a
breakdown of pre and post trading analysis.
33 DMA Trading with Level 2 Access.
33 Work own bid and offers.
33 Ability to trade within a SIPP Wrapper.
33 No minimum deposit size.
33 Accept deposits in GBP / EUR / USD.
33 All Orders emailed / texted to you once placed or exited.

* Please call to discuss for active traders

 Page 11

CFDs explained

Risk Policy
It is Guardians policy that all CFD advisory clients, should be provided with the following two-way risk warning notice:

You should not deal in CFDs unless you understand their nature and the extent of your exposure to risk. You should also be satisfied
that the product is suitable for you in the light of your circumstances and financial position. Although CFDs can be utilised for the
management of investment risk, it may not be suitable for some investors. In deciding whether to trade in CFDs, you should be aware
of the following points:

(i) CFDs can only be settled in cash. Investing in a CFD carries the same risks as investing in a future or an option or other derivative
product. Transactions in CFDs may also have a contingent liability and you should be aware of the implications of this as set out
below.
(ii) Contingent liability investment transactions, which are margined, require you to make a series of payments against the purchase
price, instead of paying the whole purchase price immediately. If you trade in contracts for differences, you may sustain a total loss
of the margin you deposit with your firm to establish or maintain a position. If the market moves against you, you may be called
upon to pay substantial additional margin at short notice to maintain the position. If you fail to do so within the time required, your
position may be liquidated at a loss and you will be responsible for the resulting deficit. Even if a transaction is not margined, it may
still carry an obligation to make further payments, in certain circumstances, over and above any amount paid when you entered the
contract. Before you begin to trade, you should obtain details of all commissions and other charges for which you will be liable. If
any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear and
written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. In
the case of futures, when commission is charged as a percentage, it will normally be as a percentage of the total contract value, and
not simply as a percentage of your initial payment.
Contracts
for
Difference
Guardian Stockbrokers
14 City Road, London, EC1Y 2AA
T. 020 7638 6996 F. 020 7638 6997
E. info@guardianstockbrokers.com
W. www.guardianstockbrokers.com

Guardian Stockbrokers Limited registered in England and Wales. Company No. 6756375. Registered office: 4345 Dorset Street, London W1U 7NA
Authorised and regulated by the Financial Services Authority (No. 492519).