CFD stands for “Contract for Difference”. It is a financial instrument that allows traders to speculate on the price movements of various assets without actually owning the underlying asset. Instead, traders enter into a contract with a broker to exchange the difference in price between the opening and closing positions of the contract.
CFDs can be traded on a wide range of financial assets, including stocks, indices, commodities, and currencies. Trading CFDs allows traders to take advantage of both rising and falling markets by going long (buying) or short (selling) on an asset.
One of the main benefits of trading CFDs is that traders can trade with leverage, which means that they can control a larger position with a smaller amount of capital. However, this also means that losses can be magnified if the trade moves against the trader.
CFD trading also involves paying a spread, which is the difference between the bid and ask prices of the asset. This is how brokers make money on CFD trades.