There are many types of financial products out there with brokers itching to provide great affiliate commissions in exchange for your converted traffic.
One of these are CFD’s - an easy to use contract, suitable for sharing with your audience.
If you’re not sure what they are, or don’t know how to sign up for an affiliate program, then you’re in the right place. All that you need to know in order to become a successful CFD affiliate is detailed below. Read on and start converting.
CFD’s or ‘Contract for Differences’ is a financial contract allowing investors to place trades on an underlying asset without having to own anything.
The basis of the principle is that you enter an agreement with your broker and purchase the contract based on the current value of the underlying asset and then once the contract has ended, a settlement takes place in the form of a cash payment.
If you’ve read our Affiliate Guide on Spread Betting you might think that CFD’s are very similar - and they are.
However there are some key differences.
Unlike Spread Betting which is only available to those who reside in the UK or Ireland, the CFD market is open to anyone globally. CFD’s attract a commission charge from brokers (in addition to the spread) upon execution of any orders and like Spread Betting, there is no stamp duty to be paid as you don’t own the underlying asset. The CFD market also attracts a capital gains tax for any profits you make.
If you see that Company X has shares with a current market price of $10 and you believe they will increase then instead of buying them outright, you could enter a CFD agreement with your broker. This might state that you are buying 100 shares (or CFD’s) at $10 per share.
Because CFD’s are a leveraged product, the broker only requires you to deposit 10% of the value. In this case, you only need to deposit $100 with the broker in order to receive the full market exposure (on the other hand, if you purchased the shares outright, you would have needed the full $1,000 up front.)
As you expected, the share price increased and on closing day of the contract, the market value was $13 per share.
Now in order to work out your actual profit we need to consider a couple of things:
The broker makes profit on this trade by earning on the differences between the price you pay and the market price. This means you will pay slightly more than market price for the asset at the start and sell it slightly lower than market price at the end. In this example you may have paid $10.05 per share when you entered the contract and received $12.95 per share when contract closed.
Under the CFD model, brokers also charge commission for executing orders which means you might have paid a small fee when entering the contract and again when it closes. You might see some rates around 0.10% of the value. In this example, for entering the contract you might pay: 100 shares* $10 *0.10% = $1 and for closing the contract: 100 shares * $13 * 0.10% = $1.30 (in reality there would probably be a minimum charge tied into the calculation as well i.e. 0.10% commission or minimum of $10.)
After taking the above into consideration, we can see that your CFD agreement would have returned the following figures:
Cost: 100 shares * $10.05 = $1,005.
Commission (entry): $1.00
Sale Price: 100 shares * $12.95 = $1,295.
Commission (exit): $1.30
So your total profit from this contract (with only $100 deposit) is $287.70.
Remember that you will probably have to pay capital gains tax on this profit as well.
A few benefits include:
While the risks include:
Now that you have a basic understanding on what a CFD is and how the market works, you might be considering how it can benefit you and your audience.
There’s no point promoting an affiliate product to your audience if they are unsuitable. Your first decision is to find out if trading in the financial market is something that your lists would actually be interested in, and this all depends on how you’ve built them. If you have a list of avid potato farmers then you might not get the best conversion rates.
If you do think this is an ideal product to promote, then it’s time to consider what value you can bring to your audience and the benefits listed above are a great place to start. You can show your audience how easy it is to trade in the CFD market. With the ability to utilize leverage, enter contracts on nearly any global asset, and the ability to go short on a market if you desired - they will be happy to learn all that you can teach them. Not to mention that it’s a tax friendly investment as well.
These are all clear cut reasons on how your audience members can profit from being exposed to CFD markets.
If helping your audience members find, and succeed, in a new financial market isn’t rewarding enough on its own, then perhaps earning commissions and potential future growth opportunities for your business, might encourage you to become a CFD affiliate.
Commissions: The main reason most people turn their hand to affiliate marketing is to try and monetise their audience that they’ve spent so long growing. If you’re in the sphere of financial trading, or have an audience interested in that market, then you are well suited to profit from CFD affiliate programs.
Future Growth Opportunity: Trading has come a long way in terms of technology in the last decade. There are now multiple platforms and devices capable of supporting trading activities. More accessibility means a growing market. All that the waves of new traders need is someone to show them a few good brokers and it’s a win-win for all. If you can cement yourself in the market now as a trusted guide then you could be setting up a strong base for future growth.
There are a few different methods that CFD brokers use to pay their affiliates and some of the main ones are covered below.
What structure you receive will greatly depend on the broker(s) you decide to partner with. Some will operate in a set way and others will give you an option. You need to decide what structure would work best for your own situation.
As there are many types of commission structure, and many different rates offered within each type, providing an example is quite tricky.
You can take the underlying idea of this example below and adjust it to your own situation based on size of your list, how active your audience is, how well suited they are to the product and what type of commission and rates you want. You can then play around with a few of the variables and project your own results.
Let’s assume you sign up to an affiliate program that pays $400 CPA and have 5,000 unique visitors per month to your website.
If 2% of those visitors sign up for trial accounts, and of those trial accounts, 10% open active trading accounts (which earns you a referral fee) then your monthly income would look like this:
5,000 visitors * 2% trial accounts * 10% conversion into active trading accounts * $400 CPA = $4,000 per month in referral fees.
Now that you’re excited to get started, you need to take a moment to consider what type of affiliate partnership you want!
It’s not all about commissions, although that obviously plays an important role. There are a few other factors that definitely need considering.
There’s a lot to consider here but if you work through it and find a broker that’s a great match with good terms for you, then you could be setting your online business up for fantastic revenues and continued growth in the exciting world of online trading.