Contract for differences are commonly called CFDs. In the financial world, CFDs are essentially contracts that promise that the buyer will pay the difference between an asset’s current assessed value and the asset’s contract value (the price of the asset at the time of the contract’s execution). If there is a positive difference, the buyer pays the difference and the seller makes a profit. However, if there is a negative difference between the contract price and the current market value price, then the seller pays the difference and a loss is assumed. One of the most alluring benefits to investing with CFDs is the ability to trade on margin. However, the generous margin terms also make contracts for difference quite risky. To better understand the concept of margin trading and CFDs as a whole, I will go into what exactly a margin is. [Read more…]

Contracts for differences are allowed in over a dozen countries in the world but come along with strict laws and limitations. In the United States for instance, the U.S Securities and Exchange Commission does not allow CFDs to be traded. However, for those who live in countries where trading CFDs is an option, opening a CFD account is much easier to understand and complete than the complex laws and regulations that often go into the the process itself. [Read more…]