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Westpac Banking Corp., or ‘Westpac’ (ASX; ticker: WBC), is one of Australia's ‘big four’ banks and the largest banking organisation in New Zealand. Interestingly, Westpac was Australia’s first bank, founded in 1817 as ‘The Bank of New South Wales’, which became Westpac Banking Corporation in 1982. Together with Westpac, Australia and New Zealand Banking Group (ANZ), Commonwealth Bank (CBA), and National Australia Bank (NAB) account for approximately 75% of Australian household banking deposits and home loans.
Boasting a market value of A$107.48 billion (market capitalisation) and an employee count of 40,000, the bank’s core operations involve banking and financial services to household consumers and businesses as well as wealth management services.
CFDs, or ‘Contract for Differences’, are popular leveraged derivative instruments used for speculation and hedging across global financial markets. Along with Westpac Share CFDs, investors use CFDs to invest in the Forex market, Commodities, Bonds, Exchange-Traded Funds (ETFs), Digital Currencies, Stock Indexes and other Individual Stocks.
At their core, CFDs are structured as agreements between two parties to exchange the difference in a trading position's opening and closing prices. If the underlying asset's price rises, the party with a long position (buy) will be in a winning position, and the party short (sell) will be in a losing position. Note that gains and losses are unrealised until the trade is closed.
CFDs function as derivatives. This means investors trade based on the market price movement; a CFD contract does not bestow ownership on either party, and all trades are cash-settled transactions.
Another key factor with CFDs is leverage. CFDs allow investors to increase their position size by more than their account equity through margin. For example, Westpac is trading at A$32.07 per share as of writing. Purchasing ten company shares would set the investor back A$320.70 (unleveraged). At the same time, trading CFDs with FP Markets, with a 20% margin requirement (A$32.07), will enable the investor to trade an equivalent position size of ten shares.
1. Open an FP Markets Forex and CFD Trading Account
To begin investing in Westpac Share CFDs with FP Markets, you must open a live trading account.
This can be done by visiting the FP Markets website https://www.fpmarkets.com, and clicking the ‘OPEN LIVE’ button in the upper right corner. This will take you to the Account Application stage, as illustrated below.
2. Download your Trading Platform
After your account is approved, an email will be sent with all the login details needed to access the FP Markets Client Portal. From within the Client Portal, you can update your personal information, explore the Social Trading platform, and download your preferred trading platform, as shown below.
While several trading platforms are available with FP Markets, for this guide, we will assume you’ll be trading on MetaTrader 5 (MT5).
3. Find the Westpac Ticker
To find the Westpac ticker (WBC) on MT5, open your Market Watch tab (Ctrl+M), which lists all the active bid and ask quotes offered at FP Markets. Type ‘WBC’ in the ‘click to add’ feature at the bottom of your Market Watch; this will then display the Westpac stock. Following this, click on the stock, which will then be added to the Market Watch. At this point, you are free to drag and drop the stock to the chart interface and alter the chart’s preferences to suit your trading style.
4. Place the Buy or Sell Order
Once the stock’s chart is set to your preferences and research indicates a potential direction, you can place a buy or sell order through MT5’s order window (F9).
The next step involves setting the trade parameters, including the preferred Order Type, Trading Volume, as well as Stop-Loss or Take-Profit values (below).
An alternative means of buying and selling on MT5 is through ‘One-Click Trading’ (see image below). With the trading volume fixed to your risk parameters, this feature permits investors to enter a market rapidly with ‘one-click’. While longer-term investors generally do not use One-Click Trading, short-term traders – think scalpers and day traders – frequently do.
Opening long and short positions in Share CFDs:
Westpac has rallied +38% year to date, crossing above A$30.00 for the first time since 2018. Needless to say, sentiment is on the side of buyers for now.
While prospective investors will have to wait until November for the company’s latest earnings, it is worth noting that some investors find comfort in the fact that Westpac is one of the most well-known banking organisations in the world, with a history dating back to the early 19th century. Dividend investors are also particularly fond of this stock, offering an annual dividend yield of nearly 5.0%.
However, some analysts have expressed concern about the company’s share price nearing all-time highs. Investors tend to avoid buying around all-time highs and prefer to wait for a correction. Technical analysts emphasise a similar tone, highlighting the potential for a correction to support.
The overall trend for Westpac is north on the monthly chart, structured through a series of higher highs and higher lows since bottoming at A$23.66 before the onset of COVID-19 in early March 2020. The recent break of resistance at A$29.16 (now marked as potential support) also paved the way for further outperformance towards resistance at A$32.91. The next port of resistance beyond here can be seen at A$35.70, with a breach here shining light on all-time highs of A$39.75.
The trend is also clear on the daily chart, opening the door to potential dip-buying opportunities. Following the year-to-date high formed at A$37.17 this week, investors will likely have this stock on their watchlists, monitoring for a correction to buy into. Support at A$29.92, coupled with trendline support, taken from the low of A$20.41, could be an area that dip-buyers make a show from were a deep enough correction to unfold.
Unlike CFDs, purchasing physical shares of Westpac through an investment broker (‘nominee shareholder’) grants the investor (‘beneficiary shareholder’) partial ownership of said company proportionate to the number of shares bought.
In addition to dividend payments and voting rights, should the company outperform, demand for its shares will increase, raising its share price and generating capital gains for investors.
ETFs are pooled investment vehicles designed to include baskets of asset classes, including Forex, Commodities, Bonds, etc. The structure of ETFs will depend on the fund’s objectives. Most ETFs, nevertheless, are passively managed, meaning they track underlying indexes, such as the S&P 500 in the US, the DAX 40 in Germany, and the FTSE 100 in the UK. Given this, an ETF will not precisely track Westpac's price movement, even if the company is listed in the ETF.
1. Does Westpac pay a dividend?
Yes, Westpac pays dividends; at the time of writing, the company offers an annual dividend yield of nearly 4.7%.
2. What are the major differences between CFDs and physical shares?
CFDs and physical shares differ in several ways, the most significant being ownership rights and leverage.
As CFDs are derivative products, they track the underlying share price of the company. This means CFD investors trade on the underlying price movement: no physical ownership is involved. In contrast, when you buy physical shares, the investor becomes a partial company owner.
Regarding leverage, while physical shares can be traded on margin (leverage), the leverage an investor can obtain is much smaller than in the CFD market. With FP Markets, margin requirements for Share CFDs average between 5-20%.
3. Can I trade Westpac on MT4 or MT5?
With FP Markets, you can trade Westpac via CFD trading on MT5 and cTrader.
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