Index and share CFDs
What you learn in 3 minutesAn index CFD tracks a basket of companies, so one position moves with the whole market. A share CFD tracks one company, so one piece of news can move it alone. Both are priced in the currency of the underlying market, not in pesos, and both have trading hours and events that a currency pair such as EUR/USD does not have.
One index point on US30 at a price step of 1.0
| Step | Amount | Note |
|---|---|---|
| Index level shown on the chart | 39,000 points | the quoted price of the basket, not a peso amount |
| Price step of the CFD | 1.0 index point | the smallest change the platform quotes; this step varies between brokers |
| Value of one step per contract | ₱56 | set by the broker and shown in the contract specification |
| Move in the example | 20 steps | the index rises from 39,000 to 39,020 |
| Result before costs | ₱1,120 | 20 steps x ₱56 per step |
The broker may round the price step, charge a spread on entry and exit, apply a daily financing charge for positions held overnight, and adjust the position for dividends paid by companies in the basket. All of these change the final figure.
The mistake people make here
The common mistake is to treat an index CFD like a currency pair that is always open. An index trades only during its exchange session, so a position held past the close can reopen at a very different level. People also forget that a share CFD can be adjusted for dividends, which changes the cash balance without any price move. Check the contract specification for trading hours, price step and dividend rules before placing the order, and keep the position size small enough that a gap does not decide the outcome.Check yourself
An index CFD has a price step of 1.0 point worth ₱56 per contract. The index moves 35 points in your favour. What is the result before costs?
35 steps x ₱56 = ₱1,960 before costs.
EUR/USD is at 1.0850 and one pip on one standard lot is 10 units of the quote currency. What is one pip worth in pesos if the broker converts at that rate?
10 x 1.0850 = ₱10.85 per pip, before any conversion charge.
In the Philippines
- Regulator
- The SEC Philippines oversees investment products offered to residents.
- Account funding
- Brokers commonly accept GCash and bank transfer; the methods offered vary between brokers.
- Currency of the account
- A peso account converts profits and losses from the currency of the underlying market.
- Trading hours
- A foreign index trades during its own exchange session, which falls outside normal Philippine daytime hours.
- Taxes
- Tax treatment of trading gains depends on your personal circumstances; check with a qualified professional.