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A contract for difference (CFD) is a contract made between a buyer and a seller that clearly states the buyer’s obligation to pay the seller the difference between the current value of a certain asset and its value at the time the contract was signed.
To simplify: CFDs allow for trading price differences.
The value behind CFD contracts is not connected to an asset’s underlying value. In fact, it is tied to the price change between trade opening and closing times. Traders can increase their equity by trading CFDs even in the scenario where the price movement is negative. CFD trading has gained enormous popularity in the past decade.
Trading CFDs allows investors to profit from price movement without actually owning the underlying assets. The very nature of this type of trading makes it more accessible than the conventional stock exchange with its high entry barriers.
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