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Top 3 Tips for Trading CFDs on Facebook Shares With City Index

LONDON May 18, 2012

Trading CFDs on Facebook shares Friday May 18

With a Contract for Difference (CFD), you do not own the underlying instrument; therefore, you are not required to pay Stamp Duty in the UK*.

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Below, we offer you top five tips for trading CFDs on Facebook shares as of this afternoon when its shares become available to CFD trade.

Top 5 Tips for Trading Facebook Shares

Trading Tip 1. What is Facebook’s Share Price?

First, let’s look at the IPO to get a clearer idea of Facebook’s value and share price.

15:00 BST on Thursday $100 billion $34-$38

By nature, IPOs are however unpredictable and with the added celebrity factor that Facebook brings -the share price could become highly volatile following its initial flotation in the market, as many previous IPO’s has shown.

Trading Tip 2.  Research Previous IPO Examples

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Before you trade, it is important to know what you’re dealing with – which is why you researched the Facebook IPO above – and now you need to research what could happen.

One way to gain an insight into how Facebook shares could perform on Friday is to research how previous IPO’s of a similar company or popularity fared.

You could focus on those within the same social sector, such as LinkedIn and Google.

LinkedIn’s shares more than doubled on the first day of its IPO. However, a lot of this was trading based on hype; this is why after the hysteria had died down, the firm’s share price subsequently lost a third of its value in the next month.

On the other hand, when Google went public in 2004, its own share price also doubled but over a longer period of two months – and has never looked back.

What could be taken from this by some investors is, one, IPO’s can be somewhat unpredictable, and two, to be mindful of additional volatility which could see wide and dramatic price swings.

Trading Tip 3. Analyse Investor Demand

In the same way Facebook marketers consider ‘social proofing’ a key benefit for promoting their brand through the social network – whereby users are more likely to be drawn to a business page with more likes than one with none – the same can be said for investor demand.

As the saying goes – you’re only as good as your last review – and this could easily be adapted to the demand for Facebook shares.

The investor demand is high – extremely high – so much so that the company increased the size of its IPO by almost 25% (£84 million) due to the sheer size of demand.

This translates to: the higher the investor demand, the higher the share price.

How to Trade CFDs with City Index

CFD trading provider City Index

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With their City Trading™ App, you can trade Facebook shares from wherever you are and whenever you want, as of this afternoon when they launch [Friday 18 May].

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

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*CFD trading is exempt from UK stamp duty. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

SOURCE City Index

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