What is a Contract For Difference (CFD)?

A Contract For Difference or CFD is an agreement which allows a professional market trader to make a profit (or loss) from variations in the price of the CFD. The price of the Contract For Difference is determined by an underlying reference instrument (which could be any tradeable security made available by your CFD broker such as a share on the stockmarket, a metal on the commodities market or a currency on the forex market.).

Holding a Contract For Difference does not mean you own the underlying reference instrument/security, or that you are actually trading the actual security by owning the CFD (which depends if your CFD broker is Direct Market Access (DMA) or a market maker).

The profit (or loss) you make on trading CFDs will be a net calculation of:

• the difference between the price of the CFD when you opened the position and the price of the CFD when you close the trade.
• adjustments made by your CFD broker (usually caused by company actions on underlying securities)
• commissions payable by your broker (usually from dividends of underlying security)
• additional rollover charges, rollover benefits, financing charges and benefits relating to the CFD trade.