Contract for Difference (“CFD”)
What is a CFD?
A CFD is a versatile product that allows you to trade an underlying share, index or commodity contract without having to own the asset itself. It is a contract between two entities; the “buyer” and the “seller”.
This future contract specifies that the buyer will pay to the seller the difference between the current value of an asset and its value at contract due time. If the difference is negative, then the seller pays instead to the buyer.
A CFD will allow you to make a relatively small five percent; ten percent; or twenty percent deposit; to control a larger position in commodities (like gold; oil) or stock indices. For example; a $5,000 investment in a CFD on the price of Oil will allow you to control a $50,000 value position; a small ten percent rise in the price would generate a $5,000 profit which would be a 100 percent return on the capital investment.
Why Trade CFDs?
You can buy or sell CFDs, allowing you to book profits by speculating on the price movements of the underlying market, whether it is rising or falling.
CFD trading doesn’t involve exchange fees and is perceived as being more efficient than buying and selling the underlying products upon which the contracts are based. CFDs are traded on margin, using leverage to maximize your trading capital.
At 888 markets we provide you with a wide range of CFD products that will allow you to trade on the market that best suits you.
Our offering includes:
- CFD Currencies
- CFD Indices
- CFD Commodities
- CFD Precious Metals (Gold and Silver)
888 markets Clients can Trade the following CFDs:
Described as any tangible product for which a market exists, commodities are widely traded through CFDs. Commodity CFDs cover a vast range of products such as metals, minerals, food grains, oil, energy and coffee. Often used as a strategy by investors against inflation, Commodity CFD trading has seen a surge in the number of transactions per annum in recent years.
The most attractive feature in currency trading is the volatility of the foreign exchange market. This coupled with the fact that they respond in a reasonably predictable way to external factors, makes currencies one of the most intensely traded products in the world. Currency CFDs offer an excellent opportunity to benefit from potential market moves because of the high leverage that may be offered to traders. Currency CFDs also help to negate the risk of currency conversion at the closing of the trade, helping to manage price variation risk as well as conversion charges.
Representing a virtual basket of shares, an index provides an indication of the performance of an overall market rather than just an individual share. Indices react to macroeconomic indicators, aiding the anticipation of future market movement. Trading in index CFDs may enable traders to capitalise on wider market movements and take advantage of potential lucrative returns on their investments.