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As of writing the margin requirements for share CFDs on the Australian market are as follows (could be subject to change). The margin rates listed below are also the lowest for any CFD provider in Australia.

Magnifying your returns

The chart below of Woodside Petroleum shows a large green candle several from the right where the price on the day went from $39.47 to $40.75 which is a gain of 3.24 percent.

When you consider how much margin you require to fund your position on Woodside you begin to see how magnified your returns can be. For example you only need 3% margin as Woodside is a top 20 share CFD. Therefore if Woodside rises 3% in a day then you have just made 100% return on your initial outlay.

Benefit from rising and falling markets
To go short means to open a position by first selling a CFD with the aim of profiting from a fall in its price. It is just as easy to sell short a Share, Index or Sector CFD as it is to buy.

Establishing a short position using a CFD is far easier than using physical shares. This is largely due to the Exchange regulations present in the physical market which do not apply in the CFD market. These regulations restrict the ways in which a physical share transaction can be executed. In particular, the "down-tick" rule prohibits an investor from selling a physical share into a falling market. With a CFD provider you have the ability to execute a short trade on any published price. Going short in the physical market may also require a higher margin on the value of the position. CFD providers do not usually distinguish between a long and a short position in this regard.

Therefore, on this basis alone, a CFD is a more effective means for a trader to profit from falling markets (and short term intraday movements) and can also be used more easily to hedge long positions in the physical market.

Here is a selection of the key benefits of trading CFDs.

* Commissions are lower than the physical share market with CMC Markets charging as little as $10 minimum or 0.1% for parcels over $10,000.
* Sectors and Indices are available with zero commission and 100 times leverage.
* 24 hour dealing desk and help desk.
* Lowest margin requirements with the ASX top 20 being offered at 3% margin.
* Free software that includes over 40 indicators, live data and backtesting software.
* Trade on the internet or over the phone and pay the same low brokerage (no additional costs for dealing over the phone).
* Open an account for as little as $1,000 (conditions apply).
* Place your stop and limit orders 24 hours a day online or over the phone.
* Low financing rates for all long positions allowing you maximum use of your cash.

Learn how to hedge your existing share portfolio using CFDs

One of the keys with CFDs is the ability to hedge an existing share portfolio and here we'll show you how to do that.

Let's say for example you have 5,000 AMP shares and your purchase price and current price is $7. If the price were to fall to $5 then your shares would have lost $2 each times 5,000 which equals a $10,000 loss.

With CFDs you can still own your 5,000 AMP shares but let's say you decide to hedge your shares in the market with CFDs then your investment will be protected. Here is how it works...

So as you can see there are many, many benefits associated with trading CFDs over traditional shares with mainly relate to lower transaction costs (or in some cases no transaction costs) and better leverage with your money.

More about CMC Markets CMC Markets is a pioneer of CFD trading in Australia. Our goal is to empower Australian traders by giving you access to CFDs over Australian and global markets and the ability to trade on leverage and potentially profit in almost any market condition. We run regular CFD introduction seminars and education courses around Australia for traders new to CFDs and are committed to providing a cost effective CFD trading service. Click here for more info or to start trading CFD's.