The 'CFD' (Contract for Difference) was developed to allow clients to enjoy all the benefits of owning a stock, Forex, Index or Commodity position without having to physically own the underlying instrument itself. A CFD can be any type of financial instrument including: Shares, Forex, Indices and Commodities.

For example, instead of purchasing 1,000 Microsoft shares from a stockbroker, a client could instead buy a 10 CFDs of Microsoft on the Plus500 trading platform. A $5 per share rise in the price of Microsoft would give the client a $5,000 profit, just as if he had purchased the actual shares that are traded on the exchange. A major difference is that there are no exchange fees and many of the inefficiencies of trading the underlying shares on the exchange are eliminated.

Plus500 can offer CFDs with zero commissions and very attractive margin requirements. CFDs have grown in popularity dramatically over the past few years, and we believe that this will increasingly be the preferred way to trade the financial markets.

The other major benefit of trading a CFD is the fact that the client can trade on margin. CFD trading means clients can trade a full portfolio of shares, indices or commodities without having to tie up large amounts of capital. Using the example above, a client purchasing $50,000 worth of CFD Shares will only be asked for $1,000 margin.

Trading at Plus500 is straightforward and easy with no commissions or hidden fees. Plus500 is compensated for its services through the bid/ask spread. Our trading platform lets you buy any financial instrument listed on our website and sell it as quickly as a couple of seconds later.

The main lobby of the software contains the buy/sell prices of all the instruments available. When entering an order to buy an instrument, the advanced trading platform allows you to add a stop loss, profit limit or trailing stop to protect your position - and profits.

Trading example:

You signed up and deposited $5,000 via MoneyBookers.

Balance: $5000. (Deposits - Withdraws + P&L of closed positions.

P&L = $0. (Total profit and loss of all open positions including daily premiums)

Available Balance: $5000. (Balance + P&L of open positions - Initial Margins)

Equity: $5000. (Balance + P&L of open positions).

You think that Google shares will fall soon, and decide to go ‘Short’ on Google.

5:07pm - you click ‘Short’ beside the ‘Google’ stock in the main lobby, the sell price is $290.

Your criteria are:

Number of Shares (CFDs): 100

Close at profit rate: $280 (profit will be 100*$10=$1000)

Close at loss rate: $310 (loss will be 100*$20=$2000)

The total amount you sold short are: 100*$290 = $29,000.

The Initial Margin that is needed for the Google shares is 10%: $2900.

The Maintenance Margin that is needed to maintain Google's position is 5%: $1450.

Your position is now:

Balance: $5000

P&L = 0 (usually the spread of Google is 50 cents so you would have a P&L of -$50)

Available Balance after you sold Google is: $2,100. ($5000 - 10%*$29,000 = $2,100)

'Equity': $5,000 ($5000 + $0)

9:05pm - Google climbs to $300.

Balance: $5000

P&L: -$1000 (100*$290 - 100*$300)

Available Balance: $1100 ($5000 - 10%*$29,000 -$1000= $1100)

Equity: $4000 ($5000 - $1000)

You decide to cut your losses and buy Google - you press 'Close Position' in the main lobby (near your open position).

9:05pm - your market buy executes at $300. You lost $1,000 on the trade.

Balance: $4000

P&L: 0 (no open positions)

Available Balance: $4000

Equity: $4000

The best way to learn how trading works at Plus500 is to download our free software, open an account and trade with demo money. Also read through the online help pages to get you trading quickly and effectively.

Free Demo Account features:

* No time limit

* Real market conditions - everything exactly as real trading conditions

* No risk - learn all the Plus500 features without risking your capital

* Setup, check and simulate trading strategies

* Online help and support team backup

Margin Call

The Maintenance Margin Level is the minimum amount of equity you need to maintain an open position. If your equity falls below this minimum amount, Plus500 will execute a Margin Call and close any open positions until your account equity exceeds the Maintenance Margin Level requirement.

Example of how a Margin Call can occur:

You signed up and deposited $600 via credit card

Balance: $600 (Deposits - Withdraws + P&L of closed positions)

Available Balance: $600 (Balance + P&L of open positions - Initial Margins)

P&L = $0 (total profit and loss of all open positions including daily premiums)

Equity: $600 (Balance + P&L of open positions)

11.30am - you buy 10 Google Shares (CFDs) at $540.00

The total amount you bought is: 10*$540.00 = $5400

The Initial Margin that is needed for 10 Google Shares is 10%: $540

The Maintenance Margin that is needed to maintain 10 Google Shares is 5%: $270

If your equity falls below $270 you will get a Margin Call. Plus500 will liquidate your open positions.

Balance: $600.

Available Balance after you bought the Google shares is: $60 ($600 - 10%*$5400)

P&L = $0

Equity: $600 ($600 + $0)

12.15pm - Google shares fall to $520

Balance: $600

Available Balance: $0 ($600 - 10%*$5400 + 10*($520-$540))

P&L = -$200 (10*$520 - 10*$540)

'Equity' is $400 (-$200 + $600)

1.10pm - Google shares fall to $490. You get a Margin Call and Plus500 liquidates your position.

Balance: $600

Available Balance: $0 ($600 - 10%*$5400 + 10*($490-$540))

P&L = -$500 (10*$490 - 10*$540)

Equity: $100 (-$500 + $600)

The reason you get a Margin Call is because your Equity is $100 and you need $270 to maintain an open position on 10 Google Shares. Therefore, Plus500 has liquidated your position. Your current balance is:

Balance: $100 (Balance changes only when closing a position or withdrawing funds).

Available Balance: $100 (Deposits - Withdraws + P&L of closed positions)

P&L = $0 (no open positions)

Equity: $100 (Balance + P&L of open positions)

Initial Margin

In order to open a new position, available account equity must exceed Initial Margin Level requirement. The Initial Margin Level requirement is specific to each financial instrument.

To see the Initial Margin Level for a specific instrument go to the main lobby screen of Plus500 trading platform, select the instrument you wish to view and click on ‘Details’ on the far right hand side of the screen. A popup box will appear and the Initial Margin Level in shown in the top right hand corner of the box.

Maintenance Margin

In order to keep a new position open, you must ensure the available account equity exceeds the Maintenance Margin Level. Maintenance Margin Level requirements are specific to each financial instrument.

To see the ‘Maintenance Margin Level’ for a specific instrument go to the main lobby screen of Plus500 trading platform, select the instrument you wish to view and click on ‘Details’ on the far right hand side of the screen. A popup box will appear and the Maintenance Margin Level in shown in the top right hand corner of the box.

Buying and Selling at Market Prices

You can use Plus500 to buy and sell instruments at the current market price (within the price ranges that are set for the specific instrument). The 'Market Range' for each instrument is shown in the Buy/Sell popup box that appears when you click on 'Buy' or 'Sell' in the trader lobby.

Stop Limit

A Stop Limit Order is a way to protect your profits, should the instrument (Forex, Stock, Commodity or Index) rise. The stop limit order instructs Plus500 to sell an instrument when, and if, the instrument reaches a certain price.

Stop Loss – (Maximum Loss)

A Stop Loss Order is a way to protect yourself from a loss, should the instrument (Forex, Stock, Commodity or Index) fall. The Stop Loss Order instructs Plus500 to sell the instrument when, and if, the instrument falls to a certain price.

When the stock hits this price, the Stop Loss Order becomes a Market Order. A Market Order instructs Plus500 to immediately sell at the best possible price. In a volatile market, you may not get exactly the price you wanted, but it should be close.

Protect Your Profits

The Stop Loss Order is used to protect your profits on a stock that is rising. You decide the price you want to close an instrument at and instruct Plus500 to close the position if this price is reached.

There are four ways to enter a Stop Loss Order.

1. You enter a trading price. For example, if your stock is selling at $40 per share, you could enter a Stop Loss Order for $37.50 per share. When the stock price drops to $37.50, it trips the Stop Loss Order and Plus500 sells it.

2. You enter a maximum loss amount. Plus500 will then calculate the relevant Stop Loss price.

3. You enter the distance in Pips from the current price. Plus500 will then calculate the relevant Stop Loss price.

4. You enter a percentage from the current price. Plus500 will then calculate the relevant Stop Loss price.

Trailing Stop

The Trailing Stop feature allows traders to place a Stop Loss Order which automatically updates to lock in profits as the market moves in the trader’s favour. Trailing Stops can be placed by clicking the 'Advanced' button when creating a 'Market Order'.

There are four ways to enter a Stop Loss Order:

1. You enter a Trailing Stop Price. For example, if your stock is selling at $40 per share, you might enter a Trailing Stop Loss Order at $37.50 per share.

2. You enter a Maximum Loss Amount. Plus500 will then calculate the relevant Trailing Stop.

3. You enter the distance in Pips from the current price. Plus500will then calculate the relevant Stop Loss price.

4. You enter a percentage from the current price. Plus500 will then calculate the relevant Stop Loss price.

Example of a Trailing Stop:

12.50pm Yahoo is trading at $45.51/$45.73 (Sell/Buy)

12.50pm You enter a market order with Trailing Stop of 50 pips = $0.5 = (-1.1%) to buy 100 Yahoo shares

You buy 100 Yahoo shares at $45.73

Therefore, the initial stop loss will kick in when Yahoo sells at $45.01. ($45.51 – $0.5)

2.05pm Yahoo prices start to quickly rise and reach $47.60 (the new Stop Price changes to $47.10)

3.10pm Yahoo prices continue to rise and reach $49.75 (the new Stop Price changes to $49.25)

4.15pm Yahoo prices start to dive quickly and reach $42.51. As you had a Stop Price set at $49.25, Plus500 executed the Stop Loss at this figure. Stop Loss Executed.

Profit Summary: 100* ($49.25–$45.73) = $352. (If you had not set a Trailing Stop, and only had a Stop Loss, you would have sustained a large loss.)

Entry Orders

Entry Orders are executed the moment the market price reaches your specified price and opens a new position. The price can be above or below the current trading price.

There are four types of Entry Orders:

1. Entry-Limit-Buy: wait until the price goes lower than the current price (used in buying).

2. Entry-Stop-Buy: wait until the price goes higher than the current price (used in buying).

3. Entry-Limit-Sell (going short): wait until the price goes higher than the current price (used in selling).

4. Entry-Stop-Sell (going short): wait until the price goes lower than the current price (used in selling).

For example, if you want to buy Google shares, but not until the price drops to $450, you would place an Entry-limit Buy Order at $450. If the price never drops to that level, then the order will remain unexecuted, but it will remain a pending order until you cancel it.

To create a new Entry Order with Plus500 simply:

-> Go to the main trading lobby

-> Click on 'Buy' or 'Sell'

-> Click on 'Advanced'

-> Complete the relevant entry order

-> Click on 'Buy'