International Share Trading using CFDs

Submitted by Marco on 29 March, 2008 - 12:13

Stock brokers offer services which allow share trading international stocks. But there are rules and limitations that restrict which companies we can invest and trade. What differences are involved if I were to use CFDs to trade international shares?

Using CFDs are a great way for international share trading. You will be able to easily access and trade a wide range of international shares, stocks and other securities with one trading account with the CFD provider. You can choose to trade any markets around the world as they open and close. From the beginning of the day you can follow the active trading hours of New Zealand and Australia, Asia (China, Singapore, Hong Kong, Japan, etc...), European (Frankfurt, etc...), UK and finally the US and Canadian stockmarkets.

With CFDs you can actively daytrade all the internationally known household names from the US stock exchanges (Nasdaq and NYSE)like Microsoft (Windows software), Apple (Ipods), Google, Boeing (Airplanes), American Express (Your Credit Card), Berkshire Hathaway (of Warren Buffet fame), eBay (Online Auctions), Exxon Mobil (Oil and Petroleum), Tiffany & Co (Jewelry), McDonald’s, Xerox (Photocopiers and business services) and many more.

The London Stock Exchange (LSE) in the UK also offers well known stocks such as BHP Billiton, Rio Tinto and Xstrata (which are also dually listed on the Australian Securities Exchange (ASX). This means you can trade the Australian stocks using CFDs during Australian trading hours, then trade after hours, the same stocks using CFD when the London market is open for business. Traders use this for some hedging strategies. Other known companies listed on the LSE (and are also usually listed on the FTSE index) are: GlaxoSmithKline (pharmaceuticals), BP (Petrol services), Cadbury Schweppes (chocolates and drinks), Tesco (groceries), and Prudential (insurance).

There are many household brand names which you can use for share trading international CFDs. Look in Singapore for Singapore Airlines – the biggest of the world’s airlines. Visit the Japanese markets for a look at Sony and Toyota. Then make a stop at Hong Kong to deposit some money at the Bank of China. Go for a drive in France with Renault and then enjoy the Swiss Alps with a Nestle chocolate.

Trading with CFDs on Australian stocks is the same as trading CFDs on international stocks. You can read the fundamentals of a stock, understand the charts – if you are a technical trader. Orders can be placed using the same platform or software.

Other considerations and differences include the currency differences. You can consider currency as a risk in trading international shares. You can profit (or lose) from the movement of international shares but also, currency price fluctuations can also discount or boost your profit levels. So it is wise to also consider the forex implications of trading CFDs internationally. You do not need to deposit any foreign currency or exchange your base (domestic) currency to the desired stock's currency. This is done by the system automatically when you place a trade. When you exit the trade you will be given that country's currency, which you then need to convert to cash out in your domestic currency.

Another consideration when trading international stocks with CFDs is the interest rate differentials of your country and that country. The cash rate influences any charges you need to pay for overnight positions. For example if the Australian rate is 7.25%, the USA rate is 2.25% and Japan is 0.5%: If you are long in Japan or USA, you will not pay as much interest compared to holding a CFD in Australia because of the interest rate. However if you are short you will not be paid as much in USA or Japan compared to Australia.

Good luck in trading international securities using CFDs.

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