What is a CFD?

Contract for Difference (CFDs) are financial derivatives that are a contract between the buyer and the seller. CFDs can be securities such as stocks, indices, precious metals or major commodities such as energy or agricultural products.

When a CFD expires, the buyer and the seller trade at the difference between the opening and closing prices of the trading product covered by the CFD, and the trader can profit from the rise and fall in the price of the traded commodity without having to hold the actual physical traded commodity.

CFDs have become a major hedge for financial risk and are popular with investors.