Index and share CFDs
What you learn in 3 minutesThis lesson explains what an index CFD and a share CFD are, how they differ from the currency pair used in earlier lessons, and why their trading hours, dividends and price steps change the numbers on your screen. Using an example with US30 and a local index, you will see how a single price step can be worth a different amount in A$ depending on the instrument and the time of day. By the end, you will be able to read the contract details for any CFD and work out what one point of movement means in Australian dollars.
One point on US30 and on a local index
| Step | Amount | Note |
|---|---|---|
| Index | US30 | A basket of 30 large US companies. |
| Price step (tick size) | 1.0 index point | The smallest change the platform will quote. This varies between brokers. |
| Value of one point per contract | A$1.00 | The contract size is set by the broker. Here it is A$1 per point. |
| Move in the example | 20 points | A price move from 39,000 to 39,020. |
| Gross profit or loss | A$20.00 | 20 points x A$1.00 per point = A$20.00. |
| Local index price step | 0.1 index point | A smaller step than US30. This varies between brokers. |
| Value of one point on the local index | A$10.00 | The contract size is larger. Here it is A$10 per point. |
| Move in the local example | 10 points | A price move of 10 full points. |
| Gross profit or loss on the local index | A$100.00 | 10 points x A$10.00 per point = A$100.00. |
Your broker may round the price step, charge a commission or spread on top, and adjust for dividends. The value of one point per contract is set by the broker and can differ between accounts.
The mistake people make here
The common mistake is to treat an index CFD like a currency pair and assume one point is always worth the same. In fact, the value of one point depends on the contract size your broker sets, which can be A$1, A$10 or another amount. People also forget that index and share CFDs have trading hours that follow the underlying market, so a position may be held overnight and incur a financing charge. Before you trade, check the contract specifications for the price step, the value per point and the trading hours. If you are unsure, use the platform's calculator or ask your broker for the exact numbers.Check yourself
If one point on an index CFD is worth A$2.00 and the index moves 15 points in your favour, what is the gross profit before costs?
15 points x A$2.00 per point = A$30.00.
A share CFD has a price step of 0.01 and you hold 100 contracts. If the price moves 0.05 in your favour, what is the gross profit when one point is worth A$1.00 per contract?
The move is 0.05 / 0.01 = 5 steps. 5 steps x A$1.00 x 100 contracts = A$500.00.
In Australia
- Regulator
- ASIC
- Currency
- Australian dollar, written A$
- Payment methods
- PayID, BPAY and cards
- Example instrument
- AUD/USD, around 0.6640
- One pip on one standard lot of AUD/USD
- 10 units of the quote currency (100,000 x 0.0001), converted at the current rate