Trading Library

Like standard exchange traded funds, the goal of synthetic ETFs is to track and mirror an index or benchmark performance. So what's the difference? While standard ETFs usually invest in all the securities in the index or a sample of the securities, synthetic ETFs enters into a swap agreement with a counterparty in order to match the index performance.

How does Synthetic ETFs Work?

Share trading is not as lucrative as anyone thinks. With the uncertainty of the market, you won't be able to turn $100 into a million, unless you have a big bankroll to make it happen and lots of time in your hands. Its natural for newcomers to lose as much as 10 percent of the capital. The word ''trader'' also conjures up a rather lonely and boring image for people. Someone who is sitting in front of two or more computer monitors, studying and crunching numbers everyday, vigilant not to lose any window of opportunity.

Much has been said about the debate whether which one is more efficient: Technical or Fundamental analysis. Some prefer to based their decision on a stock's movement in the market, while others prefer to look into a company to know what they are buying for. Technical analysts prefer to spend their time on price action and chart patterns without the need to research on the stock's company. Fundamental analysts on their other hand prefer to look into a company's annual performance to make sure that they are not buying some shoddy business.

Trading CFD in ASX is composed of different elements. Previously, price and margins were discussed, so the focus is now on cashflow. This article will take a look into different factors on how money is distributed., who gets paid and when.

Contract of Interest

Options and futures are similar in a way that they are both based on trading that involves subsequent events. Buyers and sellers are making a short time gamble that the price of the underlying financial instrument will soar and drop. Both contracts are also considered advanced forms of share trading, require additional training or the use of a specialist to be able to fully understand their characteristics.

When trading CFD in ASX, initial margins are required to open contracts. Apart from that, any movements in price is covered by further payments, which are called variation margins.

If you have a long position and the price drops below the position's entry price or the previous day's closing price if it was help overnight, then a trader is required to pay the variation margin. The payment should be large enough to over the adverse movement of position's value in the market.

CFD (contract for difference) is a good way for traders to take advantage of a financial instrument without having to pay at a full price. Its a leveraged instrument that offers potentially big returns for a small outlay. Its a derivative of an underlying financial commodity, so it follows that a CFD's price is determined by that asset. In share trading how do you make sure that the prices are actually equivalent of each other?

In ASX there are four factors in place to make sure that the CFD's price is aligned with the price of the underlying:

There hundreds of companies that you can invest in. If you are a newbie scanning the market to decide what you should buy or where put your money in, the list can be overwhelming. Apart from that the research can be daunting. You have to go through a lot of websites or paperwork. But even before you begin what is it that you have to look for in a company that will make it a good investment?

When a company's shares are split, outstanding shares multiply. The shares are divided and the price is reduced. Say you have a twenty dollar bill, and somebody offers to give you two ten dollar bills in exchange for it. That's the same concept applied to share splitting. You have the same amount of money, only split into two smaller denominations.

For a newbie the stock market can be overwhelming. Apart from thousands of stocks to choose from there are also different type so financial instruments that you can look into. This is on top of all the research you have to do to be able to make money. And even with all that, in a highly unpredictable stock market, your still not guaranteed to have en early retirement. Apart form shares, options are another financial instrument you can buy.

Both of these terms can be easily confused because they are both managed funds, but they do have some essential differences. A superannuation fund is a taxation vehicle while a share fund is an investment vehicle.

A superannuation fund is a pension program that is created by a company for its employees. They are also referred to as a company pension plan. Money deposited in this fund will grow without any tax implications until the employee retires or withdraws.

For convenience, all companies and everything traded on the Australian Securities Exchange have a code identifier. These codes are displayed on ticker boards instead of the full company name. For example, BHP stands for BHP Billiton.

Some traders would say that the minimum requirement for trading the ASX is knowing the stock or company's 3-letter code. Throughout the trading process, it's easier to track instruments with a code. You will usually see 3-character codes, but codes can vary in length depending on the type of instrument.