What is CFD trading?

Contracts for Difference (CFD) give traders all the benefits of owning a particular stock, index, or commodity position – without having to physically own the underlying instrument itself. It’s a simple and inexpensive trading option, to trade the change in price of multiple commodity and equity markets, with leverage and immediate execution. A customer enters into a contract for a CFD at the quoted price and the difference between that price and the price when the position is closed is settled in cash – hence the name “Contract for Difference” or CFD.

CFD trading works like this: Instead of purchasing 1,000 Google or Facebook or Gold shares from a stockbroker, a customer could instead purchase 1,000 CFDs of that asset on Markets.com. A $10 per share fall in the price of that particular asset would give the CFD customer a $10,000 loss. Alternatively, a $10 per share rise in the price would give the customer a $10,000 profit, exactly as if the trader had bought the actual shares on the Stock Exchange.

It’s important to mention though, that with CFD trading, you can profit no matter which way the market moves. You can use CFDs to go “short” when you believe markets will fall (and close the position later by selling), or you can go “long” when you expect prices to rise (and close the position later by buying). Of course, selling at a higher/lower price than the purchase price produces a gain/loss accordingly.

Online CFD trading is increasingly growing in popularity over the past few years and we believe it is one of the best ways to trade the financial markets – period.

There are many advantages to trading CFDs at Markets.com.

  • At Markets.com, you can trade CFDs with margins between 1% - 2% (which means leverage of up to 100:1). This enables you to enter bigger positions than you would be able to if you bought the actual underlying asset.
  • There is high liquidity: All Markets.com CFDs offer competitive spreads with bid/ask quotes that are filled on the spot – without delay.
  • CFD trading enables you to trade in small and odd-size lots. Normally, this is not possible when dealing with the underlying asset itself.
  • Markets.com offers commission-free CFD trading. Furthermore, Markets.com offers free intra-day trading – positions that are opened and closed on the same day.

Please note that CFD trading is high risk/high reward, and that it is possible to lose your entire capital. Please be aware of the risks involved and trade wisely.

Trading CFDs carries risk and could result in the loss of your deposit, please trade wisely. Read full Risk Disclosure.