A Contract for Difference (CFD) is a derivative that lets you speculate on whether an asset's price will rise or fall without owning it. You profit or lose based on the difference between the price when you open the position and when you close it. CFDs cover shares, commodities, currencies, indices, and other markets.
CFD trading uses leverage, meaning you deposit only a fraction of the full position value—say, $1,000 to control a $10,000 trade with 10:1 leverage. This magnifies both profits and losses. You can take a long position (betting on a price rise) or a short position (betting on a price fall), so you can profit in both rising and falling markets.
Two key costs are overnight holding fees (swap rates for positions held past market close) and the spread (the difference between buy and sell prices). Volatility can cause sharp price swings. Losses can be substantial, and on some platforms may exceed your initial deposit. Understand your broker's specific terms and risks before trading.
