Sign In

What is CFD trading?

2022-06-23 Brokersview

  Contract for Difference, also known as CFD contract, is called Contract For Difference. It is a kind of financial derivatives that appeared relatively late in the financial market. It allows traders to speculate on short-term price changes in the financial market without asset ownership, including assets such as foreign exchange, stocks, commodities and indices. As financial derivatives, the value of CFDs is derived from the market value of the underlying asset.

  What is CFD trading?

  A contract for difference is actually a contract for price difference entered into between buyers and sellers. The contract stipulates that the seller pays the buyer the difference between the contract price and the settlement price of a commodity in cash (if the difference is negative, it is necessary to buy Pay to the seller), the whole process does not involve the transaction of the commodity entity, so we can also say that this is an investment behavior completed by calculating the difference between the opening value and the closing value of a commodity. Delivery in this process does not require touching the subject matter itself, but only delivers their contract.

  The value of the CFD does not represent the value of the asset, it is just the difference between the opening and closing of a single transaction.

  When trading CFDs, you agree to a process of swapping the market entry price and closing price of the underlying asset. In the process of negotiation, the trader is the "buyer" and the broker is the "seller", and both parties agree that the real-time market price of the asset shall prevail.

  CFDs allow traders to trade and profit on price movements of an asset without owning it. This allows traders to avoid the higher fees of traditional trading. At the same time, because the operation is relatively simple and lightweight, it is widely used in the global foreign exchange retail field.

  What financial assets can be traded with CFDs?

  Almost assets in the global financial market can be traded in CFDs, including but not limited to the following financial assets:

  Forex, gold, stocks, commodity futures, indices, cryptocurrencies, etc.

  All of the above assets can be bought or sold.