Montague Pitman Stockbrokers

CFDs

The intelligent investor's tool.

CFDs or Contracts For Difference are an agreement between two parties to exchange, at the close of the contract, on the difference between the opening price and the closing price of the underlying instrument.

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Montague Pitman's CFD trading service is designed to work with the more experienced investor. CFDs benefit a client by offering leverage trading and the ability to profit from both a rising and falling market. Our CFD desk can trade on worldwide equities, indices, FX and commodities. By using Montague Pitman's advisory dealing facility clients will receive tailored recommendations to compliment their current trading style with detailed risk/reward profiles.

Invest in CFDs for:

• Personal Broker
• Level 2 trading
• Daily CFD specific e-mail
• Worldwide markets
• Tailored stock recommendations
• Margin levels from 5%
• Stamp duty exempt
• Long and short positions emailed daily
• CFD trading in a SIPP available

Trading techniques

Stop Losses & Limit Orders

Montague Pitman recommends that all trades have a Stop loss order placed at the time of the trade. This is an automatic order to close out a trade when a certain price has been reached to help reduce loss. A stop will close the position at the pre-arranged price if and only if, the instrument trades at the price with an equal or greater volumes to your trade. If the instrument 'gaps' through the pre-arranged price the position will be closed at the next available price with the correct volume. Limit orders are the opposite of stop orders, used to take profits at an agreed price and work on the same basis.

Hedging

One of the main advantages of CFDs is the ability to profit in a falling market. Traders use this to their advantage to hedge equity positions, which are feared to have a short term drop in value by taking an equal but opposite position with a 'short' CFD.

Pairs Trading

An occasionally used strategy, this is used when traders feel one share will perform better than another generally in a similar sector. For example: Buy Rio Tinto sell BHP Billiton. This strategy is generally used in take over situations.

Trading Short

This will be a new concept to clients from an equity background. It is commonly thought the market tends up and crashes down. Equity traders can feel helpless as the market falls. By trading CFDs you can profit from the down turn.

Portfolio Strategies

We find that a mixture of the above is necessary to create a successful portfolio. For an in-depth view on the strategies you would like to use to maximise the benefits of CFD trading please contact our team on: 020 7877 8781

Leverage Trading (Margin Trading) Risks & Rewards

Leverage trading can benefit a client in two clear ways. Firstly they can replicate an existing portfolio using far less capital, for example a £500,000 portfolio could be replicated for as little as £25,000 using our impressive 5% margin rates on certain stocks. Secondly it enables a client to help magnify profits if they have a strong view on a certain instrument by increasing their exposure. Leverage trading will not be for every investor, magnified profits are offset by magnified losses. The client is required to keep sufficient funds in their trading account to cover any margin short falls, failure to do this may result in trades being automatically closed. Also in certain circumstances clients may lose more money than initially invested. It must be noted by all investors that past performance is no indication of future performance and you should only ever risk funds which you can genuinely afford to lose.

Risk Warning