Things You Should Know About CFD

CFD stands for Contract of Difference is a popular equity derivative that combines the features of many other financial instruments like stocks, options, futures and forex currency pairs. Contract of Difference is basically a contract to pay or receive the 'difference' in enter and exit prices of a trade. The contract payout will amount to the difference in the price of the asset between the time the contract is opened and the time it is closed. If the asset rises in price, the buyer receives cash from the seller, and vice versa.

Contract of Difference does not have an expiry date like options or futures contracts. As opposed to an expiry date a Contract of Difference is effectively renewed at the close of each trading day and rolled forward if desired - you can keep your position open indefinitely, providing there is enough margin in your account to support the position. There is no restriction on the entry or exit price of a Contract of Difference, no time limit is placed on when this exchange happens and no restriction is placed on buying first or selling first. Contract of Difference is traded on leverage to give traders more trading power, flexibility and opportunities.



One of the great features of CFD is that you are able to trade on both the long and the short side of the market example you can choose to 'long' or 'short' a position. If you are long, you receive dividends and pay interest, if you are short you do the reverse. It is worth noting that commission is paid on either side of the contract and you can close a contract at any time.