What is CFD and Spot FX trading?

CFD and Spot FX trading is one of many ways of investing and trading the global financial markets, regulated by the UK’s Financial Services Authority (FSA). From one trading account with LCG you can access a range of commodity products, currency markets and indices from all over the globe. With your account you have the ability to back your judgment on whether any of our markets will rise or fall in value. This is similar to buying a share via a traditional stock broker in the hope that it will rise in value, so that you can sell it for a profit at a later date.

With CFD and Spot FX trading, you can choose to decide that the market will rise, or alternatively, you might decide that it will fall. If you are correct and the market moves in your favour, you will make a profit of your CFD size multiplied by each point that the market moves in your favour. If you are wrong you will make a loss of your CFD size multiplied by each point that the market moves against you.

With CFDs you do not actually own the underlying asset that you are trading because it is a derived instrument. The prices that we provide you are derived from the underlying asset and these prices move in conjunction with that underlying asset.

So, for example, if you opened a CFD on our Silver futures market price you would not actually own that amount of Silver, but you would be buying or selling our price for Silver (Future) in the expectation of its price rising or falling. As Silver’s underlying price moves, so does our quote, meaning our derived price moves up and down just like the real underlying market.

Example 1:
The LCG price for Brent Crude Oil (March) is 97.63 – 97.68. You think the price of Brent Crude will rise so you BUY 1,000 CFDs at 97.68.

If the price falls to 96.68 – 96.73 you SELL at 96.68 to close your trade. Your loss is (96.68- 97.68) x 1,000 CFDs = $1,000.

Example 2:
The LCG price for GBP/ USD is 1.5700 – 1.5703. You think the price of GBP/ USD will fall so you SELL 1,000 Spot FX (contracts) at 1.5700.

If the price falls to 1.5650 – 1.5653 you BUY at 1.5653 to close your trade. Your profit is (1.5700 – 1.5653) x 1,000 Spot FX (contracts) = $470.