What are CFD (Contract for Difference)?

What is CFD Trading?

A contract for difference or CFD, is a tradable instrument where the client agrees to exchange the difference between the opening and closing price of a contract with a broker. CFDs are known as derivatives products in the financial trading arena.Traders never actually take possession of the underlying financial instrument being traded – it is simply a contract between two parties. The CFD follows the price movements of the underlying asset. Positive returns are realized when the asset moves according to the position taken. Traders use these financial instruments to initiate trades based on real-time price movements. With CFDs, traders can take speculative positions on the market, irrespective of the direction of the underlying markets. CFDs are a popular instrument for hedging purposes; they provide an option to offset losses when investments sour. You have the option to take a short position and gain when prices fall. CFD trading has become increasingly popular around the world, particularly in the United Kingdom. There are thousands of markets available to traders with many enjoying the widespread exposure that CFD trading offers.

CFD Trading in Action