What Is A CFD?

A financial contract for difference (CFD) is when a buyer pays the difference in the value of a security at the beginning and end of a stated period.

CFDs are derivatives that allow speculation on the price movements of an instrument. The buyers and sellers of CFDs agree on the current value of an instrument and then the value at the end of the contract, where money will be paid to either the buyer or the seller. CFDs have no expiration date, with trading made off-exchange, and typically have low entry thresholds. Many countries, like the United States, do not allow CFD trading.