Contracts for Difference (CDFs) are an agreement between a buyer and seller to settle, at the close of the contract, the difference between the opening and closing prices of a contract to by certain amounts of shares.
They are traded in a very similar manner to conventional share dealing. The major difference to trading shares or equity is that you can potentially see a return from falling markets and share prices as well as those that rise. As a result, CFD trading has grown from a limited niche practice to one of the most exciting and dynamic new ways to trade on the stock market. Traders have access to most markets and assets and are able to profit from any market movements globally all from just one account. CFDs now make up a fifth of the London Stock Exchange.
CFDs are now widely available as a retail product with investors able to invest in funds that trade in CFDs. Not only can the returns be staggering, the commission fees are relatively low at around 0.25% – although they do vary and the risks can be higher. Some CFD providers may charge higher fees, some lower, however those that do charge lower will try to compensate elsewhere so it is important to check terms and conditions and search the market thoroughly for the best CFD for you. myfinance.co.uk can help you in your search by comparing CFDs so you don't have to.