CFDs
START TRADINGAn Introduction to Contract for Differences (CFDs)
A contract for difference(CFD)is a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time.CFDs allow traders and investors an opportunity to profit from price movement without owning the underlying assets.The value of a CFD contract does not consider the asset's underlying value: only the price chang between the trade entry and exit.
This is accomplished through a contract between client and broker and does not utilize any stock, forex,commodity,or futures exchange.Trading CFDs offers several major advantages that have increased the instruments' enormous popularity in the past decade.
KEY TAKEAWAYS
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A contract for differences (CFD) is an agreement between an investor and a CFD broker to exchange the difference in the value of a financial product between the time the contract opens and closes.
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Some advantages of CFDs include access to the underlying asset at a lower cost than buying the asset outright, ease of execution, and the ability to go long or short.
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A CFD investor never actually owns the underlying asset but instead receives revenue based on the price change of that asset.
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A disadvantage of CFDs is the immediate decrease of the investor's initial position, which is reduced by the size of the spread upon entering the CFD.
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Other CFD risks include weak industry regulation, potential lack of liquidity, and the need to maintain an adequate margin.
Example of a CFD Trade
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With ATOM
With its outstanding technological innovation, low trading spreads, high execution speed, and extensive international influence, ATOM has become one of the most trusted and respected brokers in the forex market. The company continually expands its business footprint, introduces new products, enhances customer experience, and demonstrates corporate social responsibility through offline events and charitable activities. ATOM remains committed to providing the highest quality trading services and solutions to its clients.
ATOM BROKER MARKETS PTY LTD (Australia), Australian company registration number: ACN 680 284 020, this company is an authorized representative company (Australian Finance Service (AFS) representative number 001311143) of Rich Smart Finance Pty. Ltd. (Australian Financial Services License (AFSL) 441277), registered address: L1, 256 Rundle St, Adelaide, SA 5000. Disclaimer: This entity is not the issuer of, and is not responsible for, the financial products traded on or through this website.
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