Contract for Differences (CFD)
Our spreads are competitive and start from just 3 points for Brent Crude Oil.
What is Contract for Differences (CFD)?
A contract for differences (CFD) is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled.
There is no delivery of physical goods or securities with CFDs.Contracts for differences is an advanced trading strategy that is used by experienced traders and is not allowed in the United States.
Understanding of a CFD
CFDs allow traders to trade in the price movement of securities and derivatives. Derivatives are financial investments that are derived from an underlying asset.
Essentially, CFDs are used by investors to make price bets as to whether the price of the underlying asset or security will rise or fall.
Advantages of a CFD
CFDs provide traders with all of the benefits and risks of owning a security without actually owning it or having to take any physical delivery of the asset.
CFDs are traded on margin meaning the broker allows investors to borrow money to increase leverage or the size of the position to amply gains. Brokers will require traders to maintain specific account balances before they allow this type of transaction.
Transacting in CDFs
Contracts for differences can be used to trade many assets and securities including exchange-traded funds (ETFs).
Traders will also use these products to speculate on the price moves in commodity futures contracts such as those for crude oil and corn. Futures contracts are standardized agreements or contracts with obligations to buy or sell a particular asset at a preset price with a future expiration date.