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What is CFD-trading?

Contract For Difference (CFD) is a financial instrument which consist of a buyer and a seller. CFD-trading is a popular form of speculation on the financial markets since it’s very accessible and versatile.

Buy/Sell

CFD-trading is simply a contract between two parties, buyers and sellers. Stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time (if the difference is negative, then the seller pays instead to the buyer).

To put it simply if the buyer makes money, the seller loses money. This makes it possible to speculate both ways, either by selling an instrument or buying.

Leverage

Leverage is a tool that makes it possible to open a larger position than your actual equity normally allows you to. With leverage you use a fraction of the position size of the chosen instrument and volume. In simple terms the leverage multiplies your win/loss percentage.

Leverage implies an increased risk as well as increased possible profitability. You’re always protected by Negative Balance Protection.

Sounds confusing?

It’s actually really simple. Since you don’t own the underlying asset it’s very simple to speculate on upside or downside. If you think the price will go up, press Buy – if you think the price will go down, press Sell.

As per our example we have the USD/CHF. Here the Contract Value is “100.000” – however, in order to open this position you only need 1.000 USD in your account. 

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