Trader's Glossary

CFDs (Contracts for Difference)

Contracts for Difference are derivative instruments that allow traders to speculate on the changing values of a host of underlying assets without having to take ownership of them. In a contract for difference a buyer and a seller agree that the seller will, upon expiration of the contract, pay the buyer the difference between the value of the asset at the time the contract is agreed and the value at the time it expires. If the difference is negative then the buyer must instead pay the difference to the seller. When trading CFDs traders buy (or go long) when forecasting a rise, and sell (or go short) when forecasting a drop in value.