Trading CFDs on Small Mining Shares

Nearly all CFD providers in Australia offer CFDs over the shares making up the ASX top 300, the rationale behind this is simple, shares with a larger market capitalisation are often much more liquid. Many CFD brokers forget that we live in Australia, a nation abundant with resources and naturally also rich in resource shares. A large amount of shares listed on the ASX are resource based, this is actually the largest sector of the Australian share market.

Buying and selling CFDs over junior resource stocks can be extremely rewarding if you select your stocks prudently. When buying and selling CFDs over speculative stocks you should always do some research on the company. Before choosing your stocks you must ensure that the company has great management and a quality project. Obviously if the copper price has gone up and you are looking for exposure to stocks in this sector logically you would not select a CFD over a stock with gold assets, this is why deciding on shares within the relevant sector is also important. It is always vital that you keep in mind trading CFDs over speculative stocks has risks as these kinds of shares can go up in price as quick as they can come down.

So why a trade CFD instead of buying the Stock outright?
The answer to this question is simple and can be summed up in a few words, unrealised profits and losses. Unlike stocks CFDs are marked to market every day meaning that the profits or losses are credited or deducted to and from your trading account each trading day. The profits and losses from buying and selling shares are handled very differently in that they are only realised once the equity is sold. Realising profits and losses each day means that you are able to utilize your unrealised to profits to open up new positions without having to deposit additional money into your account, needless to say the same goes for losses in that you'll have to deposit money into your account if the trade moves against you.

It’s vital that you note that most speculative shares may have a higher margin prerequisite than shares in the ASX top 300, their margin requirement can easily be as high as 100% allthough the bulk are obtainable on a margin of 75%. One significant factor to think about here is whether or not your CFD provider will charge you financing on the full notional value of the position, this would of course be fairly high if the position was on a 100% margin, there are on the other hand a number of CFD providers that will only charge financing on the borrowed quantity. It would be far more cost effective to pick a CFD company that will only charge you on the borrowed amount, if the CFD is on 100% margin this would result in a significant cost saving.

There are very few CFD companies in Australia that will permit you to trade CFDs on all ASX listed stocks, certainly one of the most common CFD providers is IC Markets. One of many major advanatages of trading with IC Markets is that they do not have any CFDs on 100% leverage and only charge financing on the borrowed total meaning that you won’t pay any financing charges for CFDs bought on 100% margin.

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To find out more regarding buying and selling CFDs on speculative resource stocks you must visit IC Markets website, here you will find allot of CFD education to help you create your trading strategy and get started.

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