Trading CFDs means that you can either make a profit or loss, depending on which direction your chosen asset moves in. What are contracts for difference? Contracts for difference are financial derivative products that allow traders to speculate on short-term price movements.
What is a CFD (contract for difference)?
A CFD (contract for difference) is an agreement between a buyer and a seller that the buyer must pay the difference between the current value of an asset and its value at contract time. A CFD trader will never truly own the underlying asset but profit from its price movement.
Are CFDs cash-settled?
CFDs are cash-settled but usually allow ample margin trading so that investors need only put up a small amount of the contract's notional payoff. CFDs allow traders to trade in the price movement of securities and derivatives. Derivatives are financial investments that are derived from an underlying asset.
How do CFDs work?
Essentially, investors can use CFDs to make bets about whether or not the price of the underlying asset or security will rise or fall. Traders can bet on either upward or downward movements. If the trader who has purchased a CFD sees the asset’s price increase, they will offer their holding for sale.
