A CFD is a contract for difference, an agreement between a buyer and a seller, to exchange the difference between the price paid for a contract and the price sold. CFDs come in a range of different products for example indices, currencies/fx, commodities and stocks. A CFD is a derivative, meaning its a product whose price derives from the underlying asset. There are tens of thousands of products to trade, allowing you to speculate on the future price movements of your favorite assets. Because you don’t actually own the underlying asset, one of the key features to CFDs is that they enable you to either buy (go long), or sell (go short) in any market. This means that a quick thinking trader can profit from fast aggressive moves, regardless if markets are spiking higher or spiraling downwards.
What is a CFD and Why do We Love it?
Bear in mind, any losses stemming from trading CFDs can be offset against your capitals gains tax, if you have other investments, this can work out to be surprisingly tax efficient. CFDs can be traded throughout the day, regardless if the underlying market is open or not, enabling access to your positions and orders 24 hours 5 days a week.
CFDs are leveraged products, meaning you need only deposit a small fraction of the total position you want to trade, This radically improves your chances of making substantial profits but, beware, the same is true on the downside.
We mentioned earlier that when you trade CFDs you do not actually own the underlying asset. This therefore exempts you from paying a stamp duty which means you pocket an extra on each trade. Please ensure as to the tax laws under your specific circumstances or in your specific country.
CFDs have never been more popular and it is clear to see why. With a click of a button you can gain access to 1000’s of global markets and at the same time benefit from tight spreads, competitive commissions and low margins.