What Are CFDs?
With CFD trading, you can take advantage of market fluctuations, however minor they are, and even if they are downward moves, without having to own the actual underlying asset.
Contracts for difference, also commonly referred to as CFDs, are agreements to exchange the difference in value of a given asset (shares, stocks indexes and commodity futures) between the opening/closing time of the contract. It is a derivative that allows traders to speculate on the price of underlying asset. When trading CFDs, you do not actually own the underlying product, you are just speculating on its future direction. In effect CFDs are financial derivatives that allow investors to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments and are often used to speculate on those markets. CFDs are traded the same way as currency contracts.
CFD trading is a great way to diversify your portfolio – it allows you to speculate on the general direction of the world's major stock indices, currency rates, and commodities. CFD trading gives you an opportunity to buy or sell a specified amount of an asset involving only a limited amount of money for initial margin – a percentage of the nominal price of the CFD.
CFD Trading is unique because of -
- Full market exposure with no physical purchase.
- The ability to profit from rising or falling markets.
- Low transaction costs compared to "traditional" trading.
- The use of leverage to enhance profit margins with respect to account size.
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