What are CFD's?



CFD is an acronym for Contract For Difference. It is a contract between two parties: You - the trader, and a your CFD provider. Under the contract, one party agrees to pay the other an amount of cash for the price difference between when you opened the CFD position and when you closed the CFD position. CFDs can be traded over many different underlying instruments. The profit or loss on a trade is determined by the difference between the entry and exit price.


  • Stock XYZ is trading at $1.00
  • You buy 100 XYZ CFD's at $1.00
  • Stock XYZ's price increases to $1.20
  • You sell 100 XYZ CFD's at $1.20
  • You are paid the difference between the buy price and the sell price (20c) for each CFD

If the stock drops in value, you pay the difference

  • Stock XYZ is trading at $1.00
  • You buy 100 XYZ CFD's at $1.00
  • Stock XYZ's price drops to $0.80
  • You sell 100 XYZ CFD's at $0.80
  • You pay the difference between the buy price and the sell price (20c) for each CFD