CFD stands for Contracts for Difference. It is a margin based trading. If the difference between the open and close is negative, the buyer pays to the seller. On the other hand, if the difference is positive, the buyer gains.
CFDs allow investors to take long and short positions without physically owning the underlying assets. It is a derivative product that is not regulated on any exchange. Because it is a margin based product, investors only need to put up a fraction of the actual value of the asset they wish to trade.
The growth of CFDs has been tremendous in recent years due to its simplicity, wide range of available products, and relatively inexpensive cost to trade. CFDs were originally developed in the early 1990s in London. It was created to imitate traditional equity trading and serve as a hedging instrument to existing investing products.
Benefits of CFDs
Wide range of trading instruments
World indices and stocks
Margin based trading
No stamp duty on UK shares
Flexibility
No delivery or trading expiration period
Receive dividends on long positions
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