What is CFD Trading?
CFD or Contract for Difference is a modern-day financial instrument that enables you to benefit from price fluctuations in indices, commodities, stocks and more without actually having to purchasing them. In other words, CFD defines the difference between where a trade is entered (open) and exited (closed/expired).
In fact, CFD trading is very similar to Forex trading. When you execute a CFD trade on the platform, you choose the product you want to trade and enter your order. For example, if you think the price of gold will rise in value, you will purchase the gold CFD. It works the other way around as well. If you believe the price of gold will decrease, you will sell the gold CFD.
CFDs have become more and more popular as traders enjoy the lower capital requirements. They enable traders to partake in markets they may not have had access to beforehand because of excessive margin requirements or regulatory issues. CFD trading allows traders to go long or short on an asset, and in some countries, such as the U.K., investors can avoid paying stamp duty fees since CFDs are derivative trading products.