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mistyrains

36,517 Posts.

1

06/07/15

22:16

Post #: 15589765
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Originally posted by marble10 ↑

Greetings,
Just wondering how CFDs actually work. I get it , but not fully. My questions:

if share-cfds are like a 'virtual share', that means we don't own the share, but we enter into a contract to pay the difference. is that just like betting? if i lose, i lose my money and that goes into the hands of the winners right? and the broker/provider charges me a fee to do this 'betting'. and if that is the case, why do we need to pay margin for the full position, as we're not actually getting any shares. why bother paying for that, if we're just betting?

also, the DMA stuff? OTC share-cfds don't follow the market while DMA does. what do they mean when they say that we are placing orders directly into the underlying market. we're just betting, the cfd just follows the bid/ask price, that's all, we don't touch the underlying market at all right? as there are no real shares behind the share-cfd (we can't buy up the price) , it's made up right . please clarify in simple language someone.

thanks

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@marble10,

You should get hold of some PDS (Product Disclosure Statement) of CFD (market maker, and DMA), read them. It is all explained there.
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