Updated on 30 September 2021
A contract-for-difference (CFD) is a contract between a buyer and a seller. CFDs allow traders to trade assets on leverage without owning them. CFDs allow traders to profit from the positive or negative movement of an asset by opening a long or short respectively. CFDs are for traders that are speculating on the price of an asset.
A CFD contract is opened between a buyer and a seller. When the buyer wants to close the contract, the seller will pay the difference between the opening price of the underlying asset and the current price. If the current price is negative in relation to the position direction, the seller will be paid by the buyer instead.
Leveraged trading is a high-risk activity that can result in losses that exceed deposits.
Taking on such risks may not be suitable for everyone, which is something you’ll have to decide for yourself.
For an introduction to trading on leverage and associated risks, please read these articles