Contract For Difference(CFD) currently is very popular with global retail investors. As implied, CFD is a contract between buyers and sellers about the difference. The contract stipulates that the seller pays the buyer the difference between the contract price and the settlement price of a certain commodity in cash. （If the difference is negative, the buyer needs to pay to the seller）， The transaction of the commodity entity is not involved in the whole process, so we can also say that this is an investment behavior by calculating the difference between the opening and closing value of a certain commodity. The transaction amount in the contract is the difference multiplied by the number of price contracts specified in the contract, and the contract will be updated and automatically renewed on each trading day.
The commodities involved in a CFD can be stocks, stock indices, interest rates or financial derivatives, and are not limited to these most basic assets. The entire transaction process is derived from your judgment of the market.
CFDs are a relatively new type of financial derivatives that are currently traded on stock exchanges in several countries.
As mentioned above, a CFD is a sale made at the price of a commodity and does not involve transactions in that commodity entity. Therefore, the commodity of a CFD in a common sense can theoretically be all things with floating prices, including national indices, financial derivatives, futures, stocks, precious metals and other commodities.
However, in financial derivatives trading, CFDs often refer to non-financial derivatives CFDs, which exclude financial derivatives margin trading, while others exclude stock index CFDs. Only commodity CFDs mainly include agricultural products, precious metals, Energy products. It depends on the definition and classification of each platform.
CFDs are traded with margin, so investors can use more capital, because only a small percentage of the total position can be invested to make a transaction, while enjoying the full benefits and risks of market volatility.
CFDs do not involve physical delivery. In this way, CFD investors have the opportunity to make a profit in the bear market and the bull market (short-term intraday market changes).
CFDs offer you a way to trade at a low cost with one account. All index, bond and commodity futures CFD trading are commission-free.
CFDs not only reflect price changes in the stock's physical trading market, but also reflect the impact of corporate actions on prices in the underlying stock or index market.