What is CFD or contract for difference

1. What is Contracts for Difference (CFD)?
A CFD is an agreement between 2 parties to settle the difference between the opening price and closing price of the
contract multiplied by the number of shares specified. It is therefore a unique trading instrument that allows the
customers to trade in stocks with the key features of leveraging and short-selling.

2. Key Features of Phillip CFD?
These are the advantages of using Phillip Stock CFD:
_ Portfolio Diversification
Besides SGX, HKSE and KLSE, customers now have the added advantage of diversifying their stocks and CFD portfolio
with selected companies listed on the NYSE and NASDAQ. With lesser initial capital outlay (20%), customers can now
effectively perform portfolio diversification.

_ Convenience to Short Sell*
A CFD allows you to take a position on a stock without needing to buy and sell the shares themselves. Therefore, CFD
investors can take short position, and not be limited to the T+3 days contra period or be tired out by the
administrative hassles that accompany SBL trading.

* Share Borrowing and Lending(SBL) facility allows you to short the market by borrowing shares, the accompanying administrative hassles often
results in investors missing out on the ‘right’ price to sell.

_ 5 Times Trading Power, Increased Leverage
Phillip CFD will enable you to leverage up to 5 times the capital, allowing clients to pay only a fraction of the
underlying capital required.

_ 30 Calendar Days “CONTRA”
Each CFD contract has an expiry date of 30 calendar days. Investors can choose to close out anytimebefore
expiration. If contracts are not closed out within 30 calendar days, they will be automatically renewed at the end of
the 30th day.

_ Sophisticated Trading Strategies
You will have the added ability to protect your existing share portfolio against adverse market conditions by utilizing
the Phillip CFDs to hedge your exposure, via strategies such as pair trading and spread trading.

_ Smart STOP Order§
Increase your chances of winning and minimize losses with the use of the STOP order type. Our Stock CFD (US) now
has a system which allows for higher entries and cut loss trades. Simply by the differentiation of the mid-price and
the price input, the system will be able to identify if a customer is putting in a STOP order.

§STOP order is currently applicable for US markets only.

** Customers are advised to exercise caution when executing orders at current spread especially during volatile conditions.

_ 1.5%p.a. Interest Receivable for Short-Selling
Customers using Phillip US Stock CFD to short-sell will receive interest on their overnight short positions.

3. Corporate Actions

Dividends
A holder of long Phillip CFD on the quoted shares* will receive a credit adjustment** in the account, where the adjustment is equivalent to the net dividend payment due on the underlying shares. Conversely, a holder of short
Phillip CFD will incur a debit adjustment** where it is equivalent to the gross dividend.
*Shares refers to companies being listed on the respective exchanges
**Dividends adjustment will be in the respective exchanges’ currencies.

Bonus, Stock Splits, and Reverse Splits
Quantity and price adjustment will be made to reflect the market equivalent.
Note: Notwithstanding the foregoing, PSPL reserves the right to close all open positions relating to the underlying security before the ex-date for
any corporate action not mentioned above.

In the event there is a combination of Corporate Actions (“CA-Cum All”), where it includes corporate actions other than above mentioned,
clients might not be able to enjoy the entitlement and may be required to close off all open positions before the ex-date.

Eg. ABC stock announces $0.05 dividend per share (which Phillip CFD originally caters for) & 1 for 10 rights issue at $0.60 (which Phillip CFD
originally does not cater for). Ex-date for both Corporate Actions is on 1st October 07.

Clients who are holding the above position would not be entitled to both the rights & dividends and would have to liquidate their positions before
ex-date.

4. Settlement Currency
All Phillip CFD contracts would be settled in the traded currencies. Client’s MYR ledger is not allowed to go into deficit. Should there be a deficit, MYR ledger will be forced converted into SGD. For USD and HKD, there will be NO
AUTO CONVERSION for USD and HKD should there be any margin deficit in these 2 currencies. Should there be any margin deficit in the respective ledger, clients should submit conversion request to avoid margin debit interest.

Exchanges - Settlement Currency
SGX - Singapore Dollars
KLSE / HKSE / US - Traded Currency

Counters Available
For the latest list of counters Phillip CFD issues, please visit our CFD website @ www.phillipcfd.com to download the counter list.

Placing Orders
Phillip CFD orders can be placed in a similar way as placing an ordinary share order. They can be placed through
POEMS online or through your Trading Representatives.

Mini CFDs – Trade BLUE CHIPS at half a lot
You may place long or short CFD order of 500 shares instead of 1 board lot for the following SGX Blue Chips.
Mini CFDs counters
1 City Dev 6 Keppel Corp
2 DBS 7 SGX
3 F&N 8 SIA
4 Great Eastern 9 UOB
5 Jardine C&C 10 Venture

Minimum Deposit
Investors are required to put up an initial deposit of S$3,000 before any trades can be initiated. Thereafter, the
maintenance margin will be 20% of your portfolio market value, marked to market daily.

Withdrawal
Margin Excess from cash deposit may be withdrawn.

Mode of Payment
_ Cash payment for your CFD trading account can be made at the Head Office’s cashier counter.
_ EPS (Electronic Payment for Shares): Please choose “Lump Sum” payment and initiate payments before 9 pm to
ensure that your CFD ledger is credited punctually before the next market day. Kindly inform your dealer/remisier that the EPS is meant for your CFD trading account.
_ Cheque should be crossed and made payable to “Phillip Securities Pte Ltd”. Please state your trading account number, name and contact number on the back of the cheque, and stating clearly that this payment is meant for
Phillip CFD.
_ Existing Phillip clients can initiate transfer from your stock & shares trading account to CFD account via online or through your dealer / remisier.
_ Telegraphic Transfer (TT): Please state your trading account number and name along with the telegraphic transfer. Kindly inform your dealer/remisier that the TT amount is meant for your CFD trading account.

Closure of Account
An administrative fee of up to S$1.07 (inclusive of GST) would be levied for account closure with credit balance
of S$1.00 or below.

Fees & Charges
_ Commission‪
Market Commission Minimum Commission
SGX 0.3% for contract value > S$12,000
0.5% for contract value X S$12,000
Above applies to non STI component stocks
*0.1% for Component Stocks (*Promo till 31 Jul 08)
S$22 / US$15 / HK$150
KLSE 0.6% (Settlement Currency in MYR) RM60 (Settlement Currency in MYR)
HKSE §0.35% (§Promo till 30 Jun 08) HK$150
NYSE / NASDAQ 0.25%* US$25*
An additional renewal commission will be applied on the 30th day closing price. GST on commission.
Upon renewal, the new contract value will be the last done price (on T+30) multiplied by the contract quantity.
* Commission will be calculated on per trade basis, no amalgamation will be performed.

Differences between CFD & Traditional Shares (Singapore Market)
CFD Traditional shares
Settlement period _ T+30 calendar days _ T+3 market days
Capital Outlay _ 20% _ 100% on T+3

“Short-sell”function Just a mouse click away Subjected to T+4 buy-in if you
shortsell
without buying
back on same day
Financing charges 5.5% p.a. (Long) N.A
4.0%* or 8.0% p.a. (Short)
(based on 100% of opening
contract value)

Share ownership No Yes
Commission 0.2% or 0.3% or 0.5% 0.28% - 0.5%
*Rates are subjected to change*

SGX clearing
& access fee N.A 0.0475%

Short A Stock in Singapore Stock Market Using CFD For Example

A client is bearish on ZZ (listed on SGX and non-STI component stock) and sells 4,000 shares (2 times leverage) at S$1.40 after borrowing from SBL. Alternatively, the client can deposit the S$2,800 and sell up to S$14,000 worth of CFD contract in counter ZZ at S$1.40.

Scenario 1: Positions are closed 10 days later @ S$1.30

Original Investment Short CFDS$2,800 Short StockS$2,800

Opening contract value (Day 1) S$14,000 S$5,600
Opening commission (incl GST) (S$44.94) (S$16.78)
Clearing & Access fees (incl GST) S$0 (S$2.85)
Borrowing Charge (S$30.68) (S$10.74)
Closing contract value (Day 10) (S$13,000) (S$5,200)
Handling fee (incl GST) S$0 (S$21.94)
Closing Commission (incl GST) (S$41.73) (S$15.58)
Clearing & Access fee (incl GST) S$0 (S$2.64)
Net Gain S$882.65 S$329.47

Scenario 1: Positions are closed 10 days later @ S$1.50 (with a loss)

Original Investment Short CFDS$2,800 Short StockS$2,800
Opening contract value (Day 1) S$14,000 S$5,600
Opening commission (incl GST) (S$44.94) (S$16.78)
Clearing & Access fees (incl GST) S$0 (S$2.85)
Borrowing Charge (S$30.68) (S$10.74)
Closing contract value (Day 10) (S$15,000) (S$6,000)
Handling fee (incl GST) S$0 (S$21.94)
Closing Commission (incl GST) (S$48.15) (S$17.98)
Clearing & Access fee (incl GST) S$0 (S$3.05)
Net Loss (S$1123.77) (S$473.34)

Source : www.phillipcfd.com

What is MACD?
by Rooney Yong

The popular “MACD”, Moving Average Convergence Divergence (MACD) is a trending indicator, telling us whether a stock is in an uptrend or a downtrend.

Developed by Gerald Appel in the 60s, the MACD Oscillator is composed of two lines: the MACD line, which is the difference between two exponential moving averages (EMAs) and a signal line, which is an EMA of the MACD line itself.
The signal line is plotted on top of the MACD to show buy/sell alerts.

Generally, MACD uses a 26-day and 12-day EMA, based on the daily close, and a 9-day EMA for the signal line.

There are two techniques commonly used to interpret the MACD:

1. Signal line crossover - When MACD line drops below the signal line, it is a bearish signal indicating that it may be time to sell or go short. Conversely, when the MACD line goes above the signal line, the indicator gives a bullish signal, suggesting that it may be a good time to buy.

2. Zeroline crossover - When MACD line cross above the zero line, it is a bullish signal. Some traders consider the zeroline corssvoer to be more reliable than signal line crossover which is more prone to whipsaws.

3. Divergence - When the stock price moves in opposite direction to the MACD, it signals the current trend may come to an end. Negative divergence is that when stock price creates higher high but the MACD fails to reach new high, be on the alert that the recent price uptrend move may reverse. Positive divergence is that when stock price hits lower low but the MACD fails to create lower low, it signals that recent downward movement of stock price may end and stock price may resume upward movement again.

MACD signal line crossover

On the right is a candlestick chart of a stock with MACD crossover signals at the bottom. You can see that for this stock the MACD signals have been quite accurate, giving 5 crossover signals between April and August. I would have no complains with this indicator.

First signal In mid April, the MACD line cut below the signal line triggering a sell signal and the stock price corrected for a few days.

Second signal Then in end April, the MACD cut back up the signal line giving a buy signal and we can see the stock price staged a nice rally.

Third signal At the end of May the MACD line cut below again. </span>The stock price corrected briefly. The MACD line then stayed below the signal line for one month with the stock price moving side-way.

Fourth signal Early July the MACD line cut above signal line again giving a buy signal and a nice rally.

Fifth signal End July MACD line cut below signal line giving sell signal.

MACD Divergence Signals

On the right is a candlestick chart of a stock with MACD divergence signals at the bottom. MACD divergence signals do not happen very often BUT the accuracy is quite high. You can see that for this stock the MACD divergence signals occurred twice and both signals have been quite accurate, giving 2 MACD divergence signals in February and March.

First signal : At the end of February, when stock price rallied to a Higher High, we can see that MACD rebounded BUT only to a Lower High, this is a sign that the upward momentum may be losing steam. After the MACD divergence, we can also see that there is a bearish engulfing candlestick chart pattern (a negative reversal signal also) raising the probability that the stock is likely to correct soon. And so it did dropping over the next few days.

Second signal : In early March, we can see that the stock start to stabilize and has not created new lows. In fact it created a Higher Low in the middle of March while the MACD line created a Lower Low. This divergence signal indicated that the downward trend may end soon and so it did, moving steadily upward again.

This was further confirmed by the MACD line cutting above the signal line.

Weakness of MACD
Many traders will tell you that the most common problem of using MACD is that it is a lagging indicator since it is based on averages of historical prices.

However, it remains one of the most favored tools by many traders and should be used in combination with other tools. Also, MACD signals although lagging, still give earlier signal than the basic moving average crossover signals.

Note When using any indicator, do not just rely on the signal from one indicator, it is always good practice to combine the signals with other indicators to increase the probabilities.

Personal tips
Past pattern will also give you an insight into potential future behaviour.
If previously the stock reacted in a specific way to the past signals, the odds of it reacting in the same manner in future is likely to be higher.