What is CFD Trading?

T he abbreviation CFD stands for Contract for Difference. CFD trading is one of the most popular forms of derivative trading that allows you to speculate on the rise or fall of the prices of fast-paced global financial markets and instruments. These include currencies, shares, indices, bonds, treasuries, and commodities. As a CFD trader, you will have the option to trade on margin – shorting (selling) if you believe the prices of a particular market or instrument will go down or longing (buying) when you have reason to believe that the prices will go up. Because you will basically be speculating on the price movement of commodities rather than actually owning the underlying instruments, you will not be required to pay stamp duty on your CFD trading profits in the UK. CFD trading has become a very popular option for investors in the financial markets because: 1. CFD is tax efficient. 2. It is a flexible form of trading where traders can make money when the markets are falling or rising. 3. CFD trading is a leveraged form of trade. A small amount of money can be leveraged to a much larger value for even higher profits. 4. Traders can use CFD trades to hedge their existing physical portfolios. This can help offset any potential loss in the value of physical investments by shorting. If you have not tried CFD trading, you should find out more on how it works and whether it is a suitable form of investment for you.