Copy Trading of Stocks (Shares) on AAAFX and ZuluTrade Platforms

How do Stock CFDs Work?

Stocks (or shares) of listed companies can be speculated with.

Online brokers may offer contracts for difference (CFDs) with different companies’ stocks as the underlying assets for these CFDs.

When a stock CFD is bought, the buyer does not actually own the stock itself but merely speculates on the price movement of that stock by means of the CFD.

With stock CFDs (contracts for difference), investors can go long (buy) or go short (sell).

With a long position, a rise in price will produce a profit. On the other hand, a short position makes money when the price of a stock moves lower.

The price of a stock is influenced by supply and demand.

The forces that influence supply and demand are manifold – fundamental factors (e.g. earnings per share), investor sentiment, technical factors, news about the particular company or its industry sector, etc.

At the moment, AAAFX offers the most popular stocks from DOW30 and Nasdaq.

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What is the difference between Stocks and Stock CFDs?

CFD trading mimics share trading with the exception that in a contract for difference, you actually don’t own the underlying asset, unlike company shares, where you do.

What you are essentially doing with CFD trading is buying a contract between yourself and the CFD provider that, depending on your position as (either ‘Short Sell’ or ‘Buy’), will have an entry price when entering a trade, and an exit price when clearing out your trade with an equal opposite position.

One of the key differences between trading a CFD long vs buying security is that you can enjoy larger leverage features.

Contracts for difference are traded on margin, meaning there is no need to tie up the full market value of purchasing the equivalent stock position.

There are also a number of key differences between trading an underlying asset and a CFD:

CFDs stocks can be traded long or short, and you are not required to deliver the underlying asset in the event of a short sale.

The investor doesn’t own the underlying asset over which the CFD is based, but instead enters a contractual agreement with the CFD broker, to exchange the cash difference in the price between the opening and closing prices of the contract.

As opposed to holding the underlying asset, a CFD is traded on margin which means that an initial deposit is lodged with the CFD broker, which allows the investor to buy or sell a number of CFDs according to margin computations, which generally allow extra leverage over the stock purchase itself.

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What is the leverage for Stock CFDs?

Like all other Equities Stock CFDs, Leverage Level is to 1:20.

Example: Let’s assume that you buy 5 Facebook CFDs at $400. The margin requirement is 5%, you would only be required to outlay $100, thus leaving you with more money to utilize on other trades.

Foreign exchange trading leverage means that you borrow a certain percentage of the amount from the dealer to open a position.

Leverage determines the percentage of the face value of the transaction as a margin.

In simple terms, you can think of leverage as the loan you have before you trade currencies.

Under normal circumstances, in order to make leverage work, the broker will require a portion of the account funds to be allocated to each trading position (number of lots).

Therefore, the margin is the minimum capital required for each open position.

The margin depends on the account leverage; if the leverage is 1:30, then you can trade more than 30 times the minimum capital required to open a position.

Simply put, you can think of margin as a good credit deposit to release your loan (leverage).

For example, for a major currency pair, eg USD/JPY, when using 30 times leverage, you can use USD 7000 to trade a position equivalent to USD 100,000, which means that the exchange merchant will allocate USD 3,300 as a down payment, or ” “Security Deposit”, while allowing you to “loan” the balance.

Of course, any profit or loss will be added to or deducted from the cash amount in your account.

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Trading Volume for Stock CFD trading

Currently, AAAFX has not set a minimum transaction volume for each order.

However, third-party processors may delay or cancel trading orders of less than USD 1,000 (notional value).

The number of foreign exchange transactions is the transaction volume itself, which is the amount of currency to buy/sell.

Under normal circumstances, for a trading currency pair, 1 standard hand is 100,000 transaction volume, 1 mini hand is 10,000 transaction volume, and 1 micro hand is 1,000 transaction volume.

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What are the trading hours for Stocks CFDs?

Unlike the Forex market which can basically be traded 24 hours a day, 5 days a week, the global stock markets are only open for about 6.5 to 8.5 hours a day, 5 days a week, depending on the exchange.

The times at which different countries’ stocks can be traded also differ according to the timezone of each country.

At the moment, AAAFX only supports U.S. Stock Market CFDs, thus, AAAFX follows the regular Trading Session hours of the U.S. Stock Market (NASDAQ, Dow 30): Workdays 09:30 a.m to 4:00 p.m (Eastern Standard Time — EST).

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What’s the condition of Dividend for Stock CFDs?

When you buy some stock CFDs in a company, you usually benefit from any dividends paid by the company on these stocks.

A dividend is a reward that companies pass to their shareholders and it’s coming from the company’s net profit.

Such rewards can either be in the form of cash, cash equivalent, shares, etc., and are mostly paid from the remaining share of profit once essential expenses are met.

In the simplest terms, a dividend is an investor’s share of a company’s profits.

Ex-dividend date:

The ex-dividend date is the first day that a stock trades without a dividend.

On this day, the price of the stock will be reduced by the amount of the dividend.

The reduction comes from the price of the last trade in the previous session.

The company does not set the ex-dividend date – the ex-dividend date is set by the stock exchange where the company trades in.

Those who purchase shares on or after the ex-dividend date are not entitled to a dividend.

Record Date:

The record date is the date at which the investor must be on the company’s books in order to receive a dividend.

Investors who are not registered as of this date will not receive the dividend.

Payment Date:

The payment date is the date on which dividends are paid to investors who are entitled to get dividends.

The payment is being processed through AAAFX’s liquidity provider and for that reason, there might be slight delays or amendments.

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What is a stock split?

When a company announced a share split, the number of shares in the company increased, but the market value remained the same.

This action requires the prior approval of the company’s board of directors and usually involves the issuance of additional shares to existing shareholders.

For example, ABC Company has 4 million shares outstanding, each worth $10.

In this case, the company’s total market value is 40 million US dollars (4 million x 10 US dollars per share).

After a two-to-one stock split, the company’s number of shares will double to 8 million shares, and the value of these shares will be reduced by half to $5.

However, the company’s total market value will remain unchanged, only 40 million US dollars (8 million * 5 US dollars/share).

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Know the Corporate Actions beforehand

Corporate actions are events initiated by a publicly traded company that usually have a direct or indirect impact on shareholders and result in material changes to its Stock.

Examples:
Corporate actions include stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.

All of these are major decisions that typically need to be approved by the company’s board of directors and authorized by its shareholders.

Please find here the corporate events that have been announced by AAAFX’s supportive companies for next month. (upon clicking on, the user will download a pdf file including all actions that have been announced from the companies AAAFX supports).

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