Contracts for Difference (CFDs)

Contracts for Difference or CFDs are simply contracts stating that one of two parties will pay the other the difference between the current value of an assets and its value at a later date.

CFDs can be complex and do carry a higher degree of risk because of the leverage. They are generally considered to be shorter term trading instruments rather than for a longer term investment. However, they can be used as a hedge instrument.

It is possible to lose more than your initial investment, so make sure you fully understand the risks involved before you make any foray into CFDs.

Because there is so much information already on CFDs, we haven’t reinvented the wheel. Here are a few links that may help you learn more about CFDs:

Contracts for Difference – a complete website dedicated to explaining CFDs

Listed CFDs on the ASX – covers equity, index and commodity CFDs

CFD Traders Advantage – useful tutorials and utube videos

Stockwatch – useful article on the basics