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Introduction to CFDs
Contracts for Difference, more commonly referred to as CFDs, are derivatives for trading shares both long and short. CFDs are margined products and therefore offer the trader leverage.

CFDs are designed to appeal to the stockmarket trader rather than the investor.

Day traders, short term traders, people who look to hold positions for between 1 and 20 days. Traders also like to use CFDs to go short (profit from declining prices), and in the stockmarket there's probably no better product to use.

CFDs offer traders 3 main advantages
  1. Leverage - £10k cash can be used to trade up to £100k in stock, sometimes even higher
  2. Shorting - Profit from declining prices
  3. Cost efficient - commissions are usually very competitive, plus most CFDs deal at the same bid-offer as cash stocks unlike spread betting where spread bet brokers quote their own dealing prices
Quick CFD Facts
  • CFDs have been available in the institutional market since the early 1990s
  • They were introduced to the retail market around 1996
  • They now account for about 25% of the daily turnover on the London Stock Exchange (some even say 50% on certain days)
  • CFDs are available to trade the stocks on most Western stockmarkets including pretty much all of Europe and of the US
  • Use the navigation links below this article and duplicated on the right for more CFD information
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