What is CFD trading?

Contracts for Difference (CFD) give traders all the benefits of owning a particular stock, index, or commodity position – without having to physically own the underlying instrument itself. It’s a simple and inexpensive trading option, to trade the change in price of multiple commodity and equity markets, with leverage and immediate execution. A customer enters into a contract for a CFD at the quoted price and the difference between that price and the price when the position is closed is settled in cash – hence the name “Contract for Difference” or CFD.

CFD trading works like this: Instead of purchasing 1,000 Google or Facebook or Gold shares from a stockbroker, a customer could instead purchase 1,000 CFDs of that asset on Markets.com. A $10 per share fall in the price of that particular asset would give the CFD customer a $10,000 loss. Alternatively, a $10 per share rise in the price would give the customer a $10,000 profit, exactly as if the trader had bought the actual shares on the Stock Exchange.

It’s important to mention though, that with CFD trading, you can profit no matter which way the market moves. You can use CFDs to go “short” when you believe markets will fall (and close the position later by selling), or you can go “long” when you expect prices to rise (and close the position later by buying). Of course, selling at a higher/lower price than the purchase price produces a gain/loss accordingly.

Online CFD trading is increasingly growing in popularity over the past few years and we believe it is one of the best ways to trade the financial markets – period.