By Bhavin Geary
Contracts for difference (CFDs) are a type of derivatives contract that allows you to trade on the price movement of an underlying asset. CFDs can be used for long and short trades, which means they offer more versatility than traditional stock trading.
These contracts also allow traders to speculate on movements in foreign exchange rates, interest rates, commodities prices, and other financial instruments.
First: The first one is the size of the contract.
CFDs are available in several sizes, ranging from mini contracts for small moves to massive 250K lots that make it possible to trade on large price movements in single trades.
Second: The second one is how much you can earn or lose per point move in your favor when trading CFDs over traditional stock transactions.
With most stock investments, any movement above or below an investor’s initial purchase price will result in gains or losses.
However, with contract for difference, traders only pay attention to changes they have benefited from rather than their total market position, which means that if they hold long places and prices go up, then they profit, but if prices fall, then only the difference between those two values matter (the loss).
Third: The last one is how much you can earn or lose when trading CFDs.
CFDs allow traders to place a deposit that is either equal to or less than the full value of their underlying asset. That means that they only need to put down a small percentage, called the margin, of the full value to enter a trade.
