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  • Why is liquidity important?
    When trading in a liquid stock it is easier to find someone to trade with, independently if you are buying or selling. This reduces the risk of owning the stock or more specifically of not being able to trade out of the position. A liquid stock will also more quickly adapt to a new price level as interest in the stock is larger. The result is that for a liquid share, the price will often reflect the fundamental valuation of the company better. Overall, high liquidity in a share tends to increase the overall willingness to invest in that share.
  • Can I use CFDs to hedge my other investments?
    Some traders use CFDs to hedge their other investments, such as shares that they may currently hold. They may trade CFDs to go short on markets as a way to hedge short-term volatility by taking a position in the opposite direction of their share position.

    If the market does fall in value, the loss to their share position could be offset by gains in their short CFD share trade. However, if the share price had increased instead, then they could close their CFD position and any losses could be offset by profits to their shareholding.
  • What’s the difference between CFD trading and share dealing?
    One major difference between trading contracts for difference (‘CFD’) and share dealing is that when you trade a CFD, which is a leveraged product, you are speculating on the underlying market’s price without taking ownership of the underlying asset, whereas when you trade shares you need to take ownership of the underlying stocks.

    Another difference is that you trade with leverage when trading CFDs, meaning you’ll only need to put up a fraction of the full value to open and maintain a position – the ‘margin’ – to gain full exposure. While leverage enables you to spread your capital further, your profit or loss will still be calculated on the full size of your position. That means both profits and losses can be hugely magnified compared to your outlay, and that losses can exceed deposits. For this reason, it is important to pay attention to the leverage ratio and make sure that you are trading within your means. When you trade shares, on the other hand, you’ll need to pay the full cost of your position upfront so cannot lose more than you invest.
  • What is market making？
    A market maker, also called a liquidity provider, is a firm or individual that continuously provides quotes – both bids to buy and offers to sell – for a given financial instrument, as a primary trading strategy. A market maker is generally contractually and/or legally obligated to provide quotes for set period of a trading day for a minimum size and for a maximum bid-ask spread. The market maker provides liquidity and improves the functioning of the market by making the process of finding a counterparty to trade with more efficient while also bringing down the cost of trading.
  • What Is liquidity？
    Liquidity captures the extent to which a financial instrument can be bought and sold quickly at a stable price. There is no one superior measure of liquidity, there are various commonly used metrics that are all are valid for different reasons. A financial instrument’s liquidity can be measured as the total volume traded / turnover, the volume of orders sitting on the order book at a given point in time, as well as by the bid-ask spread. Although financial instruments can generally be categorised in liquidity baskets ranging from highly liquid to highly illiquid, it is important to note that liquidity is not fixed and may vary over time due to changes in market sentiment or as a result of specific events.
  • What is the bid-ask spread?
    The bid-ask spread is the difference between the best bid – the highest “buy” price – and best ask – the lowest “sell” price in the market for a given financial instrument at a certain point in time. It is a measure of the liquidity of a given financial instrument and a component of the transaction cost of trading.
  • What is short and long trading?
    Long and short are the terms used by professional traders to indicate whether a certain trade in worth buying ir selling. It also indicates the action of buying or selling itself. Long trade is the one that initiated by buying and the assets is expected to rise in the price and sold for trader’s profit. A short trade is the one when a trader sells off his assets with the intention that very asset back after they fall in price. That would also come to be profitable for said trader.
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