Contracts for Differences
A Contract for Difference (CFD) is a form of derivative trading. CFDs allow investors to speculate on the rising or falling prices of many instruments including Forex pairs, Stocks, Commodities, Indices, and Bonds. With CFDs you don’t buy or sell the underlying asset or instrument, instead you buy or sell a number of units of the particular instrument, determined by whether you think the prices will rise or fall. For every point the price of the instrument moves in your favor, you gain multiples of the number of CFD units you have bought or sold. For every point the price moves against you, you make a loss. CFD is a leveraged product, meaning you can magnify your profits, however, your losses will also be multiplied, as they are based on the full value of the position.
CFDs on assets are over-the-counter (OTC) leveraged financial instruments the value of which is determined based on the movement of the value of an underlying asset. The client makes a profit or a loss on the CFD based on the direction chosen (buy or sell) and the value of the underlying asset. The amount of profit or loss is determined based on the value of the underlying asset at the opening of a position and its value at closing of the same position. The asset is settled in cash only and the client has no rights whatsoever to the actual underlying asset.