What is CFD Trading?
Contracts for Difference, or CFDs
Here we are going to take a look at Contracts for Difference (CFD); their history, what they are and what CFD trading entails, looking at the advantages for the individual trader or investor.
For the retail trader or investor and individual market participant, the trading and investing world have expanded in the 21st Century to offer opportunities that were unthinkable in the latter 20th Century. These advances have been aided by technology improvements, the openness of financial markets and the better education of the trading and investing population, as well as the development of markets in CFDs.
Advantages of CFD Trading
There are three key advantages for trading using CFDs:
- The ability to have short and long exposure
- The capacity to trade with leverage, on margin
- The ability to hedge
What are CFDs, and what is CFD trading?
A Contract for Difference (CFD for short), is a derivative product, meaning that CFDs are derived from core financial market assets. These assets could be Forex (FX or currencies) individual stocks, share indices, commodities or maybe bonds. A CFD lets the investor or trader speculate on the price of these assets, but without actually owning the underlying asset.