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A contract for difference (CFD) is a financial derivative product that pays traders the difference between the start and end price of an underlying asset. Neither trader nor issuer ever need actually hold the asset; the contract is simply an agreement to exchange a sum of money based on its price movements. CFDs can use any underlying, but the most common are single equity CFDs or index CFDs.
A contract for difference – as the name suggests – is a contract to pay the price difference between two assets. They have been banned by the regulator in some markets (notably Hong Kong and the United States) but where they are available to trade, they are a highly popular product. The CFD allows great flexibility as neither investor nor issuer need hold the underlying asset at any point. For this reason, they have become very popular with retail investors.
CFDs are routinely available with leverage, which allows traders to magnify the size of the positions they control. This can be risky should the position move against you and requires tight risk management controls.
There are no real limits on what underlying can be included in a CFD. Because the contract only involves paying the difference in price, all that is required is an open market with an easy-to-track price so that both parties are agreed on the level. Public financial markets are of course the perfect solution to this, as they have tick by tick transparent price data.
Most CFD traders are speculators. For some assets, CFDs may be one of the few ways retail investors can share in their price movements, especially very high-value futures contracts or unusual commodities. This is because CFDs do not involve physical delivery and so have no special requirements or minimum lot sizes that can exclude retail investors.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
ADSS
8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
Trading Services
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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
