What is a Contract for Difference (CFD)?

Stock Market Terms explained as simple as possible

QUICK ANSWER

A contract for difference is a contract between a buyer and seller, stipulating that the seller will pay the buyer the difference between the current value and the value at contract time.

If the difference is negative, then the buyer pays instead to the seller.

What are the benefits of CFD trading?

The main benefit is that you can get into every trade without directly moving the market with any shares size you like. The execution of the order is instant, which makes it very easy to trade CFD’s.

Also, any restrictions (like the short-selling restriction for a stock that is down more than 10%, for example) do not apply for this kind of trading.

If you are interested in trading CFD’s, we recommend checking out one of our favorite brokers: Tradenet.

For more information, please visit Wikipedia here.

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