CFD (contract for difference) is a popular form of derivative trading. CFD trading enables you to speculate on the rising or falling prices of fast-moving global financial markets (or instruments) such as currencies, shares, commodities, indices, and treasuries.

How does CFD work?

CFD are financial derivatives that are used for speculation on price movements. Put simply, CFD is created by opening a position and ends with the position close. One may speculate on decrease or increase of prices. When closing a position, the trader’s speculation is compared to the real price movement, which then means a profit or a loss. This is then multiplied by using leverage, that enables increasing own capital by using often significantly higher volume of foreign capital. Trading with bigger “money” may then lead to profit increase, as well as to potential loss increase.