What are Contracts For Difference?

What are Contracts For Difference?

In financial terms CFD stands for a contract for difference between two parties, the buyer and the seller. The seller promises the purchaser to pay the difference between the current value of an asset and its value at the time of concluding the contract. (If the difference is negative, the buyer must pay the difference to the seller). CFDs are derivatives used by traders to go long or short on the stock market or to speculate in other underlying financial instruments.

To make it easier to explain, CFD trading basically just means trading stock, commodities, indices and currencies through a broker that sells CFDs.

You can trade CFDs in stocks, commodities, indices, and currencies on your Smartphone, tablet or PC with a number of brokers, displayed in the table below.

Continue reading: Lesson 5: What are binary options?