What is a contract for differences (CFD)?

A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades. CFDs essentially allow investors to trade the direction of securities over the very short-term and are especially popular in FX and commodities products.

What is a contract for difference?

A Contract for Difference gives traders an opportunity to leverage their trading by only having to put up a small margin deposit to hold a trading position. It also gives them substantial flexibility and opportunity.

How do contract for difference brokers make money?

The contract for difference brokers makes money primarily by charging fees and spreads. Here are a few common ways that CFD’s brokers make money: This article has been a guide to what is Contract For Difference. Here, we explain its examples, comparison with swap and futures, tax treatment, and advantages.

What is a futures contract?

Futures contracts are standardized agreements or contracts with obligations to buy or sell a particular asset at a preset price with a future expiration date. Although CFDs allow investors to trade the price movements of futures, they are not futures contracts by themselves.