A contract for difference (CFD) is athat allows to into an without actually owning the asset.
The CFD is a contract between two parties (the buyer and the seller). It states that the seller will pay the buyer the difference between the current value of an asset and its value at "contract time". If the difference is negative, the buyer pays the seller instead.
In effect, CFDs arethat allow traders to take advantage of both moving up ( ) or prices moving down ( ).
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Cost of trading with CFDs
The principal advantage of CFD trading is. Because there are typically lower requirements and markets are less , a person can trade with a much smaller account compared to trading the actual asset.
Standardin the CFD market begins with as little as a 2% margin requirement, meaning a trader can trade larger . Lower margin requirements mean less capital outlay for the trader and greater potential returns.
However, increased leverage can also magnify any losses the trader may make. Please read the following lesson on this topic: