A Contract for Difference (CFD) is an agreement between two parties (buyer and seller) to exchange the difference in value between the opening and closing prices of an asset.

The opening price is the price at the moment the agreement is made, while the closing price is the price when the agreement is executed.

In essence, CFD trading is a contract between you, as a client, and the market. You enter a trade by purchasing a contract for a specific asset and close the trade by selling the contract back to the market, ideally making a profit in the process.

CFDs can be traded on both the buy and sell sides, meaning you can open a position to profit from either rising or falling prices.

The concept remains the same: buying the contract back from the market to close the trade and, hopefully, generating a profit.

CFD contract sizes are fixed. For instance, CFDs on shares are typically based on the value of 100 shares of a given company. For example, a CFD for Google shares (GOOGL) would represent 100 shares. At the current price of USD 853.69, a full contract would be worth $85,369.

Similar to forex trading, CFDs are leveraged products. If you trade with a 1:30 leverage, you can control $30 worth of trades for every $1 deposited in your account.

With this leverage, you would need $2,845.56 in your account to trade a full contract of Google shares.

Let’s continue with the Google example: If you expect the share price to rise, you would buy a contract and then sell it back at the higher price, profiting from the difference. This is where the “for difference” concept comes in.

There’s no physical delivery of the asset involved. The contract is based solely on the difference between the opening and closing prices.

For example, if you buy a contract for Google at USD 853.69 and the price rises to USD 875.69, closing the trade would result in a profit of $22 per share (875.69 – 853.69), totaling $2,200 (22 x 100).

On the other hand, if you anticipate the price of Google shares will fall, you could sell the contract at the opening price of USD 853.69. If the price drops to USD 831.69, closing the trade would also yield a profit of $22 per share, totaling $2,200.

We offer CFDs on Commodities, Indices, and Shares through our MetaTrader 4 platform, providing advanced features to enhance your CFD trading experience.