A contract for difference (acronym CFD) is a financial derivative that allows investors to speculate on assets prices movements, without the need for ownership of the underlying assets. the contract is settled in cash. In finance, a CFD is a contract between two parties, stipulating that the CFD Broker will pay to the investor, the difference between the current value of an asset and its value at contract end time (In case the difference is negative, then the traders pay instead to the CFD Brokers).
CFD Trading provides to investors increased flexibility and leverage are other advantages of CFD Trading over more conventional forms of margin trading. All forms of margin trading involve financing charges, although in the case of CFD’s and futures contracts these are included in the price of the instrument. This leverage can make CFD’s seem attractive, but because investors are trading with leverage, both gains and losses are magnified – and traders can end up losing more than the initially invested.
CFDs are traded on margin In the securities context, margin refers to borrowing money from your broker and using your investment as collateral.In the commodities context, margin refers to the amount of cash a client must put up as collateral to support the contract.CFDs are highly leveraged instruments. This means the money you invest in CFD trading will generally only be a fraction of the market value of the contract.
Take the time to research before you choose a CFD broker!
Best CFD Brokers in Australia.