4 basic CFD instruments The abbreviation CFD comes from the English Contract For Difference, so we are talking about Contract for the Price Difference. This type of contract represents a difference between two parties based on the price movement of an underlying asset that you don't actually own, but are "speculating" on whether the price will go up or down. You can choose to trade CFDs on shares, indices, commodities or forex.
Shares A share is a security that entitles the owner of the share, i.e. the shareholder, to participate in the management, profits and possibly the liquidation balance of a public limited company. By buying shares, you become the owner of the shares and you not only own them and can later sell them at a potential profit but also at a loss. Shareholders are also paid a share of the profits, which is called a dividend, so the investor can earn money on the shares through capital or dividend income. The price of a share is determined by the supply and demand directly on the stock exchange.
How does leverage work? Leverage is a way to trade with more money than you currently have. Leverage is a tool used in trading that allows traders with little capital to make higher profits through “borrowed”a funds from a broker. Trading with leverage in CFDs (Contracts for Difference) can multiply profits. Equally, it can multiply a loss.