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miniCFDs

The new mini-CFDs service from Finspreads requires a much smaller deposit from new account holders than existing products, and IFX is promising to train people in their use.

This means that instead of having to put in the minimum £10,000 initial margin that most CFD providers demand, when opening up a miniCFD account, the minimum deposit is £100. miniCFD traders benefit from a virtual share position where the price mirrors the underlying share price. Traders can sell 'short' or buy for flexible trading in volatile markets, with low commission and no stamp duty under current law. miniCFDs were launched especially for investors who are new to CFD trading. However, the platform's ease of use is bound to be of interest to current CFD investors too.

New investors can gain a greater understanding of both the product and the trading platform during an initial five-week 'Trading Academy'. Throughout this period, investors can trade in as little as one share. This means users are free to "get their toes wet" with trading, without risking more than a pound or two of their money. But, unlike some systems, they will be trading in the 'real' market, not a dummy model. So the money they will be making (or losing) will be real enough, even if only on a small scale. There are huge benefits to using derivatives but there are also many misconceptions about CFDs, which firms like Finspreads are keen to address to give people more confidence to broaden their trading horizons.

There are two kinds of orders when buying or selling miniCFDs. A limit is when the stock has risen (or fallen) to a certain amount and you wish to collect your profit. A stop loss is the opposite, and is used to minimize risk. You can specify how much loss you are willing to take.

There are two types of stop loss. The non-guaranteed stop loss has no charge but you run the risk of the price suddenly changing and the traders closing you out at the first opportunity, but this may not be the price at which you wished to close out. With a guaranteed stop loss there is a charge of 1%. All orders left with miniCFDs can be Good Till End of day (GTD) or Good Till Cancelled (GTC).

There is no stake limit when trading on line at miniCFDs.com, but if you begin trading over certain amounts, then you might want to check out their CFDs service, which is another part of their company. There is not much difference between miniCFDs and CFDs, except that CFDs are for more experienced traders. Generally CFDs clients invest on a larger financial scale and so they are charged a flat rate commission of £15 every time they trade. If you were looking for a benchmark, then for investments of over £10,000, then CFDs might be preferable. Otherwise, miniCFDs is a good starting point, especially as you can really take advantage of the five week training course. During this time, you only have to trade one share, and this is a really good opportunity to test the water without incurring any risk. The other difference worth noting is that miniCFDs is a 100% online product without any telephone trading and there is no chat function on the platform.

When you buy a miniCFDs it is like you are buying a virtual share. So you put down 10% of the value of the shares (sometimes the 'margin' is more on the smaller, more volatile stocks and can be about 30%) and collect the profit when they go up and down, as if you actually own physical the shares. The minimum deposit to open account is £100 and they don't offer credit accounts.

If you become 'overdrawn,' i.e. if the stock falls in value, and the margin (or buffer if you like to look at it that way) does not cover 10% of the transaction, then you will go on 'margin call.' And Finspreads credit and risk department will contact you and inform you of the situation and you have about 24 hours to debit your account or close the position. If the Finspreads dealers are unable to contact you and you continue to be overdrawn, then your position will be automatically closed. To avoid this happening, the best thing is to make sure you always have excess funds in your minCFDs account and that you don't trade to the maximum capacity of your funds.

To fund your account or to withdraw funds, you can register your debit card with miniCFDs (you can do this on-line when you open an account) and then you just call up on 0207 150 0525 and say how much you would like miniCFDs to credit your account. The miniCFDs cashier staff will ask you a couple of security questions to make sure it is you. To withdraw funds you do the same. Some debit cards allow Finspreads to refund, but others don't (visa delta is the most common). In this case miniCFDs staff will do a bank transfer and it takes three days. You have to pay £25 if you want a one day transfer. No demo facility is currently available.

miniCFDs charge 0.25% to open and close the account. There is a daily financing charge if you hold a position over night which is based on the Bank of England interest rates (LIBOR). These are yearly rates so you divide the lot by 365. They also depend on if you go short or long. If you go long, (buy) then you pay LIBOR (which fluctuates but is roughly 4%) + 2% (all divided by 365. If you go short, then you pay LIBID (which is slightly less than 4%) - 2%. There are no other charges, and the spread you get on the stocks is pretty much the market spread, so it is all very transparent. You only have to put an initial deposit down of £100 to open an account with miniCFDs. This amount does not have to be maintained in the account.

There is a chart for every stock on the miniCFDs trading platform, which shows roughly the movement of the share, but if you need more detailed information, then you might want to look on other sources for specific information. The miniCFDs service is available for international clients (except US and Canadian ones, because of their national laws), as long as you provide Finspreads with a residential address.

 Check the miniCFDs terms and conditions