CFD Trading Basics

Contracts for difference (CFD) is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled. CFDs are contracts between investors and brokers to exchange the current value of a share, currency, commodity, index or other instruments with closing value. They are a marginal financial derivative that investors speculate on very short-term price movements for various underlying instruments. Because CFD is unique and often come with favourable margins, they attract many brokers across the world. Leverage plays an inherent role in the appeal of CFD trading, and it is a central component to the idea of trading contracts for difference. Leverage is when an investor borrows money from a brokerage firm and can increase his/her buying power.
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