Account balance moving up/down after closing position???
Something I never noticed has happen!
I have a broker to invest (not the one I use to trade). Minutes ago I sold my few shares of FB. However, I´ve notice that, in spite of closing the position, my account sum what still changing (droping, in this case). I asked my broker why the account sum was not unchanged (in fact, that´s whats happen in my other broker - CFDs). The broker is European, so I was told that the reason of the money change was due to EUR/USD difference, and that the change would only stop until the fixing was made in NY at 10 PM.
The fact is that with my other broker (CFD broker), whenever I close a stock position there is no account change.
So, guys, whats the difference? Is she telling me "stories" or in fact is the procedure normal? And why not trading CFDs?
Last edited by Lord Sidious; May 29th, 2012 at 05:17 PM.
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@Lord Sidious: A CFD is a private contract that you have concluded with the CFD broker. If you want to know, how your position is settled, you need to study the provisions of the private contract.
By the way you did not sell any shares in FB, you just closed out a private contract which is based on a price which is somehow related to the share price of FB.
If you open an account with a real broker and acquire a long position of FB, than sell it, this is what would happen.
(1) Account balance in €
(2) Purchase FB shares: you are now long FB and short US-$
(3) Sell FB shares: You are now flat FB and
- in case of a profit long US-$ (the net profit)
- in case of a loss short US-$ (the net loss)
Your account balance in € will slightly move up and down, depenidng on the EURUSD rate
With a CFD broker, you have to enquire what happens, if you enter a long position of FB. As you do not have any US-$, you may well be forced to purchase those $. Or maybe there is just a short position in US-$ which is shown, it really depends on the provisions of your contract.
Keep in mind that you are not trading at a regulated exchange, but you are entering into a private contract with a corporation that wants your money.